Release Date: February 19, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Castellum AB (FRA:TEX) has announced a new project in Stockholm called Infinity, which involves developing 20,000 square meters of top-class office space. The company has acquired more shares in Entra, surpassing the 1/3 threshold, indicating a strong investment strategy. Castellum AB (FRA:TEX) has received a new credit rating from S&P, complementing its existing Moody's rating, which is expected to improve financing opportunities. The board has proposed a dividend of 2.48 kronor per share, marking a return to dividends after two years of focusing on balance sheet strengthening. The company's net operating income is up by 3.4%, and income from property management has increased by 10.2%.

Negative Points

The changes in property value remain negative for the full year, with a decline of approximately 1%. Higher vacancies and increased discounts have partially offset income growth, indicating challenges in maintaining occupancy. The economic occupancy rate has only improved slightly by 0.3% during the quarter, suggesting ongoing challenges in tenant retention. Property values have been written down by approximately 1.6 billion, equivalent to a 1.2% decrease. The company faces challenges in some submarkets, with renegotiations showing a negative change in rent of 1%.

Q & A Highlights

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Q: Can we still see continued capital recycling of non-core assets here? A: Unidentified_2: We have internal targets of 40% loan to value and will stay within those boundaries. It might go up or down slightly depending on market opportunities.

Q: On the question of cap recycling, could you still see yourself being a seller in this market? A: Unidentified_1: We will continue to trim our portfolio by selling non-strategic assets to ensure effective management and focus on growth regions, but not for balance sheet adjustments.

Q: Regarding the Infinity project, what kind of rents or yield on cost do you expect? A: Unidentified_1: We expect rents above 6,000 kronor per square meter for top floors, with a yield on cost around 7.5% unleveraged, meeting our internal threshold.

Q: Do you expect the cost of debt to be flat in 2025? A: Unidentified_2: We expect it to be flat at the current level.

Story Continues

Q: How do you view the opportunity to acquire standing properties versus repurchasing shares? A: Unidentified_1: We are reviewing all options, including repurchasing shares, reducing debt, and investing in properties. Currently, acquisitions and investments in standing properties seem more attractive for creating value.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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