Jefferies began coverage on Fabege AB (FABG:SS) (OTC: FBGBY) with a Hold rating and set a price target of SEK85.00. The firm compared the real estate company's value with its peer Gecina, noting that Gecina is projected to have a 5% compound annual growth rate (CAGR) in EPRA earnings per share (EPS) from 2023 through 2026.
Fabege, which boasts a high-quality office portfolio primarily in the Greater Stockholm area, is not shielded from the current challenging market conditions. The analyst pointed out that the central business district (CBD) in Stockholm is seeing a rise in vacancies as companies are downsizing their office space. This trend is driven by a combination of increased remote work and a general decline in demand due to slower economic growth in Sweden.
The report also highlighted the Nordic region's shorter lease contracts compared to those in Western Europe, which could lead to increased risks during rent renegotiation periods. Fabege's vacancy rate climbed to 10% in the first half of 2024, up from 9% at the end of 2023.
Jefferies' initiation of coverage on Fabege at a Hold rating with a SEK85 price target reflects a cautious outlook on the company's stock, given the current market dynamics and its comparison with industry peers.
InvestingPro Insights
As investors consider Jefferies' cautious stance on Fabege AB, real-time data and insights from InvestingPro could offer additional context. The company has a market capitalization of $2.85 billion and is trading at a negative P/E ratio of -7.97, which indicates that the company has reported losses in the past. However, analysts are expecting a turnaround, predicting that Fabege will be profitable this year, aligning with an anticipated net income growth.
Despite a challenging market, Fabege is recognized as a prominent player in the Real Estate Management & Development industry. The company has demonstrated a commitment to shareholder returns, maintaining dividend payments for 27 consecutive years, with a current dividend yield of 1.1%. This could be a point of interest for income-focused investors. Nevertheless, it's important to note that the company's short-term obligations currently exceed its liquid assets, which may warrant caution.
For readers interested in a deeper analysis, there are additional InvestingPro Tips available that provide further insights into Fabege's financial health and market position. To explore these tips and gain a comprehensive understanding of Fabege's investment potential, visit https://www.investing.com/pro/FBGBY.
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