Commissioned Research: Magnolia Bostad

Magnolia Bostad is a Swedish residential developer of rental and tenant-owned apartments, care facilities and hotels in attractive locations.

Marketing material commissioned by Magnolia Bostad

Magnolia Bostad, founded in 2009 by Fredrik Holmström and Andreas Rutili, is a Swedish residential developer of rental and tenant-owned apartments, care facilities and hotels in attractive locations within growth areas. There has been rapid growth in the project portfolio since its creation.

Magnolia Bostad builds attractive and modern homes with smart functions and appealing design; the company has also expanded into care and hotel real estate. It has relatively limited counterparty risk since it divests its rental units to strong financial partners and secures production costs prior to project starts.

Temporary costs mask positive volume outlook – Updated 12 July

Magnolia Bostad’s Q2 numbers were below our expectations, mainly due to timing issues resulting in slightly fewer residential units sold and also a lower margin owing to higher non-recurring costs for listing and contract restructuring (in total SEK~10-15m, we estimate). A solid outlook for higher volumes in 2019-20 compensates for a somewhat higher cost run-rate and fits well with the potential for increased production following new frame agreements with Heimstaden and Alecta announced in Q2.

Read the full report here

Racking up second major divestment agreement – Updated 25 June

Last week, Magnolia Bostad announced a divestment agreement with Heimstaden lasting until 2023. The majority of the ~5,300 units in this SEK ~9.6bn framework are in the rental (and possibly conversion) model and span 14 projects. This agreement is comparable to the one with Slättö (SEK ~7-14bn over ~7,000 units) which we have considered a significant contributor to the stability of the rights portfolio and the outlook for future sales.

Read the update here

The bottom-line machine steams ahead – Updated 3 May

The quarter in numbers

Magnolia Bostad’s Q1 numbers were strong, beating both our estimates and Thomson Reuters’ consensus expectations. At SEK 128m, Magnolia’s Q1 gross profit was the strongest Q1 gross profit in the company’s history, at 603% y/y on very easy comparables, beating Thomson Reuters’ consensus by 83% and our forecast by 100% The rental and care business units steam on, with a project of 275 rental apartments sold during the quarter, along with one 58-unit Care project. The dilution from minorities was minimal in the quarter, yielding EPS of SEK 2.14. Full-year LTM EPS landed at SEK 7.51, meaning the LTM P/E is 7.0x.

High peformance in rental and care…

It is positive to see both rental and care continuing to bloom with future potential in the rights portfolio. With Magnolia breaking ground on its first care and hotel projects as recently as Q4, the diversification of the business model has been proven yet again.

…Spiced with tenant-owned contracts without lost focus

On top of that, the company has managed to sign ~40 tenants-owned contracts despite the current environment for such apartments. Most of these are in future projects not yet accounted for in terms of profit recognition. This bodes well for a possible recovery of the company’s tenant-owned sales. In the meantime, focus is on rentals, care and hotel projects, with 1.6% of units under production solely attributable to direct tenant-owned development. The rights portfolio is also focused on rental, care and hotels.

Read the full updated report here.

A lovely bouquet of project starts, with more to come – Updated 26 February

The quarter in numbers – strongest gross profit to date

Magnolia Bostad’s Q4 numbers were strong, beating both our and consensus’ expectations. Gross profit, the best representation of Magnolia’s performance in our view, was 50% above consensus and beat our expectations by 59%. At SEK 245m, this is the strongest gross profit performance to date with 58% CAGR from Q4 2015.

Proving its presence in Care and Hotels

Magnolia sold its first two projects within the Hotel segment, totalling 500 units, and its first project within Care, totalling 60 units. The company has thus proven its presence in Hotels and Care while delivering 3% above our expectations on the number of residential units, ie 663 versus 641. In terms of units sold, this quarter was the strongest ever seen and the performance in the non-traditional segments was a cushion to earnings that have relied purely on residentials until this point. This bodes well for future sales.

Read the full updated report here.

Waiting for the blooming season – Updated 12 December 2017

Building rights portfolio and agreements add strength

Substantial investment in the building rights portfolio and securing development rights (options), together with framework agreements with customers, should underpin the short‐term outlook on volume and earnings.

For the investor that is interested in the latest report on Magnolia, we provide the full downloadable report here.

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