Catella: Getting ready for the harvest - ABG

Strong Q1’22e driven by Principal investments & PIM
Estimates raised because of project Norrköping
2022e EV/EBIT of 7x, ~50% below avg. of peers

Strong Q1’22e driven by Principal investments and PIM
For Q1’22 (report due on 6 May), we expect EBIT of SEK 154m compared to SEK -22m in Q1’21. Looking at operational segments, we estimate that the Property Investment Management (PIM) will deliver another strong quarter, with operating profit of SEK 45m, up 61% y-o-y. Within Principal Investments, Infrahubs divested its Norrköping project in Q1’22. The company has said that the divestment generated an IRR of over 70% and a profit of SEK 150m, which should significantly boost the earnings growth in the quarter. Lastly, we expect a weaker quarter for the Corporate Finance segment, driven by fewer transactions in the quarter following the volatile capital markets and restructuring expenses of SEK 20m from the wind-down of its German Corporate Finance operations.

2022e EBIT up 16% because of Project Norrköping
We cut our Corporate Finance estimates for 2022 on the assumption of fewer transactions in the volatile capital markets and the wind-down of the German Corporate Finance operations. We have increased our 2022 estimates for Principal Investments after the divestment of Project Norrköping, which generated a profit of SEK 150m and an IRR of ~73%, well above our expectation of an IRR of 20%. In sum, we raise 2022e EBIT by 16%, while our 2023e and 2024e are unchanged.

Entering a harvesting period
Catella has entered a harvesting period, with six additional projects scheduled to be divested in 2022. The company is facing easy comps, which is why we expect strong growth throughout the year. In our view, the company has many attractive fundamentals. Applying our latest revisions, Catella is trading on a 2022e EV/EBIT of 7x, which is almost 50% below the average of our broader peer group.
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