Castellum aksjeanalyse: Det vi vil gå gjennom her er Hva de gjør, Finanser og se om vi finner noen styrker, svakheter og hva man skal se etter i fremtiden.
Castellum stock analysis: What we will go through here is What they do, Finances, and see if we find any strengths, weaknesses, and what to look for in the future.
A bit about Castellum:
Castellum is a large real estate company in Sweden that is well-diversified across multiple segments. They have been successful in increasing property values and have, in the last couple of years, experienced that these values no longer align with current interest rates.
They have the majority of their portfolio in Sweden but also have some properties in Denmark, Finland, and exposure to Norway through their ownership in Entra.
The significant debt they have has led to a large increase in shares, as they had to raise money to improve liquidity and debt levels. This was done in Q2 2023, where they went from 345 million shares to 555.
Castellum has several well-known tenants:
A bit about finances:
Castellum has addressed its debt issue, but still has some way to go.
In the next two years, there will be a significant change in debt conditions as almost half of the bonds (with the lowest interest rates) need to be renegotiated. This could significantly increase the interest rate.
They cut dividends for 2023, which I see as a positive thing. This has allowed them to gain much better control over their finances. It's always positive when a company reacts instead of digging itself deeper into trouble.
Statement
Overall, the statement seems quite fine, showing good growth. There's a good operating margin, and you can look at deferred tax and impairment values.
Personally, I feel there's a lot of noise with impairment values, but what one must keep an eye on is the interest rate.
From the net income in 2023, 1614 is deducted from Operations in cash flow for interest. This is a substantial amount and can provide indications of what an increase in bond rates might entail.
Rental Income | Net income | Results | Deferred tax | Margins | |
2014 | 3318 | 2222 | 1211 | 88 | 43.37% |
2015 | 3299 | 2225 | 2881 | -687 | 45.92% |
2016 | 4533 | 3036 | 4972 | -727 | 41.43% |
2017 | 5182 | 3577 | 5876 | -1340 | 46.87% |
2018 | 5577 | 3945 | 7453 | -793 | 51.60% |
2019 | 5821 | 4113 | 5650 | -950 | 51.21% |
2020 | 6004 | 4335 | 5615 | -1166 | 50.60% |
2021 | 6353 | 4346 | 11828 | 132 | 66.54% |
2022 | 8996 | 5838 | 1750 | -472 | 39.64% |
2023 q1-q3 | 7388 | 4939 | -5281 | 1269 | 19.48% |
Balance
"A tripling of interest-bearing debt has resulted in nearly a threefold increase in net income, but they have not been able to deliver based on my investments (although there are still some projects that are not yet profitable).
Property value has increased significantly, but they have not managed to maintain the yield. This highlights some of the weaknesses in Swedish real estate stocks, where it seems that property has been quite highly priced.
Interestbearing Debt | Total Debt | Equity | Total Assets | Real estate value | |
2014 | 18446 | 24439 | 13649 | 38088 | 37599 |
2015 | 20396 | 26884 | 15768 | 42652 | 41818 |
2016 | 38467 | 49079 | 29234 | 78313 | 70757 |
2017 | 38266 | 49976 | 33736 | 83712 | 81078 |
2018 | 40358 | 52391 | 39749 | 92140 | 89168 |
2019 | 40826 | 55208 | 43777 | 98985 | 95168 |
2020 | 45720 | 61673 | 48243 | 109916 | 103042 |
2021 | 70829 | 93995 | 83637 | 177632 | 153146 |
2022 | 76849 | 100748 | 78983 | 179731 | 153563 |
2023 q1-q3 | 65687 | 86585 | 83406 | 169991 | 144709 |
Cash flow
Here, you can see a somewhat uneven but robust performance in operations, with high investments and financial costs. A lot of money is being spent on growth, and a significant portion has been returned to investors.
Weaknesses become apparent when comparing investments and debt issuance. In general, it seems that Loan-to-Value (LTV) only kept building higher and higher. This is based on the low interest rates, which in turn led to the situation they are currently in, emerging in 2022.
Operations | Investment | Finance flow | Dividend | Pref Rights/Stock purchases | |
2014 | 1390 | 319 | -1732 | -697 | |
2015 | 1507 | -2711 | 1196 | -754 | |
2016 | 2260 | -12561 | 10519 | -804 | 6190 |
2017 | 2243 | -693 | -1604 | -1366 | |
2018 | 2485 | -2883 | 438 | -1448 | |
2019 | 3536 | -1965 | -1641 | -1667 | |
2020 | 2944 | -6508 | 3552 | -1776 | -28 |
2021 | 2603 | -13972 | 12405 | -1888 | -1038 |
2022 | 4300 | -3356 | -1332 | -1872 | -2752 |
2023 q1-q3 | 2259 | 1146 | -2909 | -624 | 9999 |
Key figures from annual reports:
Overall, Loan-to-Value (LTV) is on a downward trend along with Interest Coverage Ratio (ICR). Has the property portfolio been adjusted enough? What are the expected interest rates for the next year?
In general, I feel the key figures here are within acceptable ranges, except for ICR, which might pose some challenges in the future.
Interest rate | Occupancy | Yield | LTV | ICR | |
2014 | 3,3% | 88.7% | 6,9 | 49% | 3.18 |
2015 | 3% | 90.3% | 6,5 | 50% | 3.51 |
2016 | 2,7% | 91,3% | 5.8 | 50% | 3.48 |
2017 | 2,4% | 90,9% | 5.5 | 47% | 3.86 |
2018 | 2% | 93,2% | 5.3% | 45% | 4.54 |
2019 | 2% | 92,6% | 5.1% | 43% | 5.02 |
2020 | 1,9% | 93.1% | 5.0% | 44% | 5.3 |
2021 | 1,8% | 93.4% | 4.7% | 39,2% | 5.17 |
2022 | 2.6% | 93.40% | 5% | 42% | 3.9 (2,9 q4) |
2023 q1-q3 | 2,9% | 92.6% | 37.8% | 3.6 |
Strengths in the stock:
Good rental income.
Large company with strong owners.
Responsive when needed.
Diverse tenants, ranging from government to office and retail.
Weaknesses in the stock:
High debt.
Low Interest Coverage Ratio (ICR).
Lack of hedging has led to an unfavorable share split.
Much of the debt needs to be renegotiated.
What to keep an eye on:
Debt renegotiations.
Property write-downs against interest-bearing debt.
Credit rating - lower ratings lead to less favorable conditions.
Quick overview:
With the fundraising in Q2, there has been limited effective growth in the stock's bottom line. They have been somewhat aggressive with interest-bearing debt and willingness to invest in expensive properties. If they had raised money in a more favorable climate, they would have received a higher share price, which would have been more beneficial for the company.
Currently, they are doing okay economically, and it's positive that they cut dividends. It would be preferable to see them pay down more interest-bearing debt, even though interest rates seem to be on the way down.
Be aware that there needs to be some renegotiation of debt, which could further lower the ICR.
For more information and data, you can visit the Index on the webpage and click on real estate for google spreadsheets
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