Investing.com -- Swedish property company NP3 Fastigheter AB (ST:UNPF) on Tuesday reported strong growth in the first half of 2025, with profit from property management up 31% and net asset value increasing 16%.
The company’s management expressed confidence during its H1 earnings call, citing stable demand across markets, a diversified business model, and limited exposure to global trade risks at approximately 20%.
These factors have helped NP3 limit vacancy increases to just 40 basis points year-over-year, reaching 7.8% in H1 2025.
Management also highlighted resilience in asset values, which grew 0.9% on a like-for-like basis in H1, and improved refinancing conditions with bank spreads 50 basis points lower.
NP3 now believes it can exceed its medium-term targets, projecting a five-year compound annual growth rate above 15% in return on equity and 12% in profit from property management per share.
These targets come with constraints including a loan-to-value ratio of 50-55% (compared to 51% in H1) and an interest coverage ratio above 2x (versus 2.7x in H1).
However, analysts at Jefferies suggest these targets may be overstated by approximately 11%.
They point to several challenges, including upcoming lease expirations that will increase from 11% of total rents in 2025 to 18% in 2026 and 21% in 2027.
For context, a one percentage point increase in vacancy would translate to a 3% decline in funds from operations.
The company’s operating leverage is also lower than it appears, with net operating income up 18% in H1 versus recurring operating expenses up 17%, reflecting NP3’s sparse and highly fragmented portfolio.
Jefferies also notes that NP3 continues to use high economic leverage with a loan-to-value ratio of 58%, partly through preference share issuance of SEK400 million in H1, which is dilutive for minority shareholders.
Based on the latest annual general meeting resolution, NP3 could raise SEK1.6 billion through rights issues by May 2026.
After accounting for capital expenditures and net asset rotation, the company has approximately SEK3.5 billion available for acquisitions.
Jefferies maintains a price target of SEK200 for NP3 Fastigheter, representing a 27% downside from the current price of SEK272.50.
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