Fastpartner: Not so Fast, but a solid 2022 - ABG

Operational wheels spinning well, project costs up
Higher interest rates behind estimate cuts
5y average of 18x (P/IFPM) and 7% premium (P/NRV)

Solid operational performance in Q2’22e
Two portfolios (a small one in Gävle and a larger one primarily located in Norrköping) were acquired in Q2. Both were off-market deals, with limited information regarding rental levels. We assume SEK 1,000 /sqm and ~SEK 530m. FPAR’s leasing continues to see (pent-up?) demand with a solid inflow of tenants seeking a new, more dynamic kind of office. Some terminated office contracts have also occurred, but rental levels remain solid. Input prices are up 20-30%, according to the company, which mainly affects Arbetsbasen 3 in Västberga among its ongoing projects. FPAR’s take on the overall transaction market is a confidence hit among buyers but no panic from sellers, which paves the way for slower activity and lower volume into H2’22e.

Declining property values from Q4’22e until Q4’23e
With interest rates and the Swedish 10y gov. bond continuing their rapid rise, we now forecast that property values (excl. inflation and value gains) will decrease by ~10% from Q4’22 until Q4’23. This is the primary reason for the estimate cuts on EPRA NRV. With decreasing property values, estimated net LTV no longer supports our previous level of template acquisitions, and we have removed template acquisitions altogether. In addition, we have increased our repo rate interest assumptions, which now reflecting 25bps hikes in June, Sept. and Nove., respectively, adding to a total of +150bps until ‘24e. Removed template acquisitions and higher interest costs explain our estimate cuts to CEPS.

Trading ~-15% vs peers on EPRA NRV
The share is trading at ~14x LTM P/IFPM and a ~35% discount to last reported EPRA NRV. These metrics are clearly below FPAR’s 5y averages (18x and 7% premium) on P/IFPM and P/NAV. Moreover, they are ~-15% and ~0% vs. the average of peers ATLJ, FABG, HUFV and NYF. We lower our fair ...
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Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/fastpartner/Equity-research/2022/6/fastpartner---not-so-fast-but-a-solid-2022/