How accurate are the net asset values of real estate companies?

Det senast noterade fastighetsbolaget på den svenska aktiemarknaden är Neobo. Bolaget delades ut från SBB under det fjärde kvartalet 2022, och noterades under februari 2023. I och med att det fanns ett stort antal blankade aktier i SBB så innebar det att de som hade en kort position i SBB även kom att bli korta i Neobo. Det var därför endera tvungna att endera skaffa aktielån i Neobo eller återköpa aktierna och återlämna dem så snart som möjligt.

The most recently listed property company on the Swedish stock market is Neobo. The company was spun off from SBB in the fourth quarter of 2022, and listed in February 2023. As there were a large number of shorted shares in SBB, this meant that those who had a short position in SBB also became short in Neobo. It therefore had to either obtain share loans in Neobo or buy back the shares and return them as soon as possible.

Neobo has stated approximately SEK 57 in net asset value per share. The stock is currently trading at around SEK 13. Should the stated net asset value be correct, the stock trades at a 77% discount. Add to this the fact that those who shorted the stock indirectly by being short SBB have been forced to buy it back and the stock should be in an upward trend. It can be argued that many of those who received shares in the SBB dividend may have sold it off, but with such a high net asset value it is not economically rational.

To clarify, I have no idea how accurate the substantive value stated by Neobo is. In general, it is good to be extra careful when the flowerbed is this big. If the net asset value proves to be correct while the share is trading at a discount of 77%, it may be worth shutting down the company by selling off all assets, i.e. the real estate, paying off all debts and distributing what is left to the shareholders. Given the high intrinsic value that Neobo is said to have, it would be a fantastic deal.

Rising interest rates and the impossibility for owners of residential property to be fully compensated for high inflation. Rents for housing are rarely calculated using the CPI, but instead almost all housing rents in Sweden are determined through annual negotiations between the landlord and the Tenants’ Association.

On the other hand, the high net asset value of the stock and the many short positions suggest that the share price will rise. We saw how SBB was subjected to a blanket attack in 2022, and it is said that the same is true for Neobo. Whether it is true or not we do not comment, but it seems that this stock is something that we do not intend to invest money in. The real estate sector is not hot right now, and there are many external factors threatening it. That we find the high discount to net asset value odd, especially as it does not entice Neobo management and board to sell at these values, means we are not looking at this any further. It may well be that the net asset value is correct, but that it has simply not been possible to sell the properties as it is simply a difficult market at the moment. Regardless, it feels like this is a stock with too many question marks.

How do you think? SBB is one of Sweden’s most popular stocks, partly because it distributes, and it does so every month. The company’s main owner has promised an increasing dividend for at least 100 years. As a result, there are very many shareholders in Neobo as well. Do you own any of these shares?

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