Oscar Properties: Several positives amid macro challenges - ABG

Top-line estimates up due to acquisitions
CEPS and NRV estimates down on higher interest rates
~19x P/IFPM and ~0.40x P/EPRA NRV in 2023e

Acquisition outlook relatively well off
We note that OP signed ~SEK 1.3bn of acquisitions of in Q2 when most competitors have been unable to do similar, and we see these additions contributing to a better total portfolio. OP’s CEO confirms steadfast activity on the transaction market for high-yielding industrial properties and believes that prices on these properties will hold up due to: 1) sellers generally having sturdy balance sheets and declining poor bids, and 2) many property owners looking to expand into the segment due to solid cash flows. We keep ~SEK 500m of template acquisitions in ’23 and ’24, respectively (~SEK 1bn prev.), due to OP’s explicit growth profile (targets SEK 20bn in ‘24e) and the encouraging market outlook. We halve our assumptions to reflect lower acquisition headroom, as the share discount to EPRA NRV has risen, limiting the likelihood of new share issues.

Organic growth improvements and cash contribution
Although it is not included in our forecasts, we note optimistic signals for internally generated growth. OP has issued a press release stating that new leasing in April was SEK 6.7m (with no major cancellations) and management confirms a cautiously optimistic view of the succeeding months. Moreover, we expect the last cash contribution (SEK 240m) from the divestment of project Primus to have been received in Q2. In terms of CEPS and NRV estimate revisions, we have increased our repo rate assumptions on the back of soaring interest rate expectations, with our figures now reflecting hikes of +25bps in June, Sept. and Nov., respectively, for a total of +150bps until 2024e (+100bps previously). The ‘22e CEPS revision is an outlier, as no critical mass has yet been reached. We also assume declining property values of ~10% (excl. inflation and value gains) between Q4’22e and Q4’23e, causing EPRA NRV to fall in ’ ...
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