GS names European Real Estate value stocks, stays cautious on Nordics
29/08/2023 11:58
** Goldman Sachs sees the highest upside within European
real estate among value stocks, while it remains cautious on the
Nordic market
** The brokerage notes increasing bond yields in Europe, but
says the picture is "mixed" with the long end of the bond yield
curve more volatile
** Across its coverage, GS forecasts about 5% further
declines in property valuations where values are still falling
(about 14% peak-to-trough), and says office valuations have the
furthest yet to decline, while it sees logistics/storage to grow
** On the "buy" side, the brokerage points to landlords for
which it sees "excessively discounted" valuations, naming
Covivio CVO.PA , Grand City Properties GYC.DE (raised to
"buy" from "neutral"), Klepierre LOIM.PA ,
Unibail-Rodamco-Westfield URW.PA and Vonovia VNAn.DE
** In the Nordics, however, it says some landlords will
"increasingly face a number of headwinds" and points to peaking
underlying Nordic office real estate markets, as well as higher
leverage (48% vs 39% sector average), shorter debt maturities,
and "relatively expensive" valuations
** "We believe refinancings are likely to remain expensive
and/or complicated to source with limited access to bond
markets, resulting in lower cash flow and challenges on interest
coverage covenants for some," it adds
** It downgrades Castellum CAST.ST to "sell" from
"neutral," following outperformance of the shares and weakening
underlying macro/market trends, and forecasts higher vacancy for
the portfolio on oversupply
** It views Castellum's credit profile as at risk, while
improved from last year, pointing to high leverage, Interest
Coverage Ratio (ICR) at 2.8x and the second lowest average debt
maturity in the brokerage's coverage
** GS also cuts troubled landlord SBB's SBBb.ST target
price further, to SEK 3.3 from SEK 4.0
** The brokerage ups Finland's Kojamo KOJAMO.HE to
"neutral" from "sell", citing underperformance of the share
year-to-date
(Reporting by Greta Rosen Fondahn)
((Greta.RosenFondahn@thomsonreuters.com))