Catella - Becoming even more property-focused

Strong Q1 vs. Q4 driven by PAM divestment IPM closure reduces estimates for 2021e and 2022e… … but we still view the action as positive for the Group Q1’21 helped by PAM divestment in France For Q1’21 (due 7 May), we expect SEK 142m in EBIT, compared to SEK 23m in Q4 and SEK 62m in Q1 2020. The positive development is driven by the PAM transaction in France, where Catella divested 50.1% of its French subsidiary. The divestment is expected to have a positive effect on profit after tax of SEK 122m in Q1’21.

Looking at the different segments for Q1’21, we expect the Corporate Finance segment to show y-o-y improvement, but without any major contribution to Group EBIT. The Equity, Hedge and Fixed Income Funds segment has performed poorly during Q1, and we expect further outflows from the fund and a continued negative contribution to Group EBIT. The company has announced that it will cease its operations and return the remaining capital to investors.

In the Property Investment Management (PIM) segment, we forecast that operating profit will shrink y-o-y, as Q1’20 was boosted by an exit from Catella’s UK operations, generating significant variable income. Wind-down of IPM reduces estimates for 2021 and 2022 We reduce our estimates for 2021, mainly due to management’s decision to cease the investment operations in IPM and return all remaining capital to its investors. The closure of IPM will have a major negative effect on Catella's earnings in Q2’21e, but this also impacts our 2022 estimates.

Becoming more property investment-focused is positive We view the action of pulling the plug on IPM as decisive and positive, as the segment represented a drag on earnings. In addition, the segment had no synergies to the rest of the Group and Catella has now become more property investment-focused, which in our view is its core competitive advantage. The stock has been more or less flat for the last three months, following a weaker-than-expected Q4 report.

Currently, i....