Portfolio Rotation And Occupancy Gains Will Support Stronger Long Term Earnings Quality

Catalysts

About Nyfosa

Nyfosa is a cash flow focused commercial property owner operating across Sweden, Finland and Norway.

What are the underlying business or industry changes driving this perspective?

• Growing leasing activity in Sweden, together with positive net leasing in 2025 and a vacancy pipeline that management views as balanced, creates room for occupancy gains that could support rental income and profit from property management.
• Ongoing portfolio rotation of about SEK 5b over 5 years, where lower yielding and resource intensive assets are sold in favour of higher running yields and denser clusters, points to a mix shift that could support cash flow margins and earnings quality.
• Systematic work to cut energy use and improve EPC ratings across 2026 to 2030 builds on an earlier 10% portfolio energy reduction and can lower operating costs, which may help protect net operating income and net margins.
• Refinancing more than one third of debt in 2025, lowering the average interest rate from 5.0% to 4.2% and maintaining an equity ratio of 41.7%, gives financial flexibility that can influence earnings through lower interest costs and capacity for selective growth investments.
• Active vacancy management, including categorising vacancies and prioritising quick relets or divestment of complex projects, together with regional office density and in-house leasing teams, supports faster time to rent that could lift occupancy, rental income and profit from property management.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Altra Fastigheter's revenue will grow by 1.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 19.5% today to 45.6% in 3 years time.
• Analysts expect earnings to reach SEK 1.7 billion (and earnings per share of SEK 8.23) by about June 2029, up from SEK 693.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting SEK2.0 billion in earnings, and the most bearish expecting SEK1.4 billion.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 10.8x on those 2029 earnings, down from 18.5x today. This future PE is about the same as the current PE for the SE Real Estate industry at 10.8x.
• Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.42%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Occupancy is 89.2% and vacancy increased by SEK 48 million in 2025, and management is working to turn this around through relets, refurbishments and divestments. However, if leasing activity weakens or planned reletting and repositioning takes longer than expected, rental income and profit from property management could come under pressure, which would challenge assumptions of higher earnings and wider net margins over time.
• Roughly 20% of the portfolio is in Finland and management acknowledges that Finland accounted for around 90% of 2025 negative value changes and has weaker operational performance than Sweden. If the Finnish economy or local office and industrial markets stay soft, or if portfolio densification there is slower than planned, this could weigh on occupancy, fair value movements and ultimately earnings and net margins.
• The revised financial targets for 2026 to 2030 include a forecast profit from property management of SEK 1.5 billion in 2026 and a dividend of SEK 3 per share supported by active capital allocation and portfolio rotation of about SEK 5b over 5 years. These targets rely on Nyfosa consistently finding buyers for complex assets and reinvesting into higher yielding properties. If transaction markets become less liquid or pricing less attractive, this could limit portfolio reshaping and restrict growth in profit from property management and earnings.
• Nyfosa has reduced its average interest rate from 5.0% to 4.2% and loan to value from 50.7% to 49.7%, and plans to keep refinancing and possibly repurchasing shares. If financing conditions tighten again, lender appetite weakens or credit spreads widen, interest expenses could rise from current levels and available liquidity of about SEK 1.9b from revolving credit facilities might not stretch as far, which would squeeze net interest results, operating cash flow and profit from property management.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of SEK86.6 for Altra Fastigheter based on their expectations of its future earnings growth, profit margins and other risk factors.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SEK100.0, and the most bearish reporting a price target of just SEK80.0.
• In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be SEK3.7 billion, earnings will come to SEK1.7 billion, and it would be trading on a PE ratio of 10.8x, assuming you use a discount rate of 10.4%.
• Given the current share price of SEK66.55, the analyst price target of SEK86.6 is 23.2% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.