Wallenstam (WALL) Q1 2017 earnings summary

Executive summary

• Q1 performance reflected cost-efficient residential construction, successful commercial rent renegotiations and completed projects entering management.

• Net asset value increased SEK 600 million in Q1; 12-month rolling growth was 23.5%, above the goal of at least 10% annually.

Financial highlights

• Income from property management increased 14%; rental income rose almost 4% in comparable holdings, with completed new construction also contributing.

• Net operating income rose 8% YoY, up SEK 22 million; rental income increased SEK 21 million, while operating expenses were SEK 1 million lower.

• New construction contributed SEK 14 million in rental income and SEK 2 million in operating expenses, an 86% surplus ratio.

• Unrealized property value changes totaled SEK 369 million: SEK 132 million from new construction and SEK 237 million from existing properties.

• Central costs included a one-time SEK 2 million item; Q1 costs should not be annualized from the reported SEK 51 million.

Outlook and guidance

• Guidance remains to start 7,500 apartments by end-2018; ~1,900 apartments were under construction at March-end, with no Q1 starts and more planned in coming quarters.

• Starts depend on municipal planning processes, not construction capacity; timing can shift by one or two months.

• Strategy remains focused on constructing residential properties for long-term management; residential development is the main planned use of capital.