Trianon: ABGSC’s Investor Days feedback - ABG

Interest rate sensitivity provided by Trianon

Yield of 3.9% is above H1’22 transaction market

Potential tailwinds in coming tenant negotiations

Earnings capacity with interest rate sensitivity
We hosted Trianon yesterday at ABGSC’s Investor Days, talking about its current business momentum and recent market developments. The company emphasized that it has plenty of operational cushion given its profit resilience despite higher interest rates. In an alternative earnings capacity, Trianon has replaced its interest rate as of June with the Riksbank’s forward-looking rate path of the same month, resulting in profit from property management of SEK 252.5m (2023) and SEK 232.4m (2024). This is -20% and -26% vs. TRIAN’s normal earnings capacity while +1% and -11% vs. ABGSC (2023e and 2024e).

3.9% yield provides headroom for coming value declines
Trianon highlighted that its property valuations do not appear stretched. Its average property valuation of 3.9% (3.7% for residentials which constitute 72% of its property value) still provide some cushion for potentially upcoming value declines, since residential transactions in Malmö were made at yields below 3% in 2021 according to property consultancy firm Pangea. We also discussed some recent legislations and court rulings. Trianon ascertained that the recent ruling in the court of appeal, which limits rental uplifts of presumptive rents, has no impact on the company as its rents are at or below levels determined by the utility value system. Further, the company stressed that an agreement between the property owner association and tenant association (May 2022) improves the chances of higher rent increases for residential property owners in coming annual negotiations.

Trades above BALD & WALL but well below its own history
At 19.6x P/IFPM and 72% of EPRA NRV in 2023e, Trianon trades +9% and +13% vs. the average of Balder and Wallenstam (Infront consensus). Its LTM and last reported figures are well below its historical ...
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