Skanska could benefit from lower inflation

Skanska could benefit from lower inflation

den 16 augusti 2022 författare Carlsquare

The summer rally on the stock markets led by the S&P500 continues. Overall, slightly declining inflation figures mean that long-term investors are mainly looking for stocks in defensive sectors in companies that are deemed to have a high long-term dividend pay-out capacity.                                                                                                                

Skanska is not a defensive stock. However, the Group offers a financially strong position and a well-diversified construction and property development business in the US, UK, the Nordic region, and Eastern Europe. This structure has proven to be well suited for a stable level of dividends to shareholders over several years. Skanska declared a dividend of SEK 10 per share for FY 2021. Based on this, the share gives a yield of about 5.8%.

Skanska shares are sensitive to interest rates due to their exposure to the value of completed properties and investors' yield requirements on these. In addition, construction costs have risen sharply this year due to rising input prices on everything from rebar (steel) to sawn wood products. Since July, a reverse downward trend on these input goods seems to have started. The supply of sawn timber has increased significantly, which should have a dampening effect on further price developments.

The combination of slightly lower interest rates and construction costs could be benefiting Skanska's business. Earlier this year, rising construction costs triggered at least one Swedish property company to put new production projects on hold.

Source: Infront and Carlsquare. Note: Past performance is not a reliable indicator of future results.

Skanska’s shares rose sharply after the Q2 report on 21 July, which was better than expected. This was particularly true for the US business and the order intake at the group level, which is a leading indicator for future revenues and earnings. Since then, the Skanska share has moved relatively sideways around the same level of about SEK 173 that was last reached on June 3, where yesterday’s last quote was SEK 171. If the current trend of rebounding interest rates and input price levels continues, Skanska shares could be able to recover further.

Source: Infront and Carlsquare. Note: Past performance is not a reliable indicator of future results.

The full name for abbreviations used in the previous text:
EMA 9: 9-day exponential moving average
Fibonacci: There are several Fibonacci lines used in technical analysis. Fibonacci numbers are a sequence of numbers in which each successive number is the sum of the two previous numbers.
MA20: 20-day moving average
MA50: 50-day moving average
MA100: 100-day moving average
MA200: 200-day moving average
MACD: Moving average convergence divergence

Important notice
This information is neither an investment advice nor an investment or investment strategy recommendation, but advertisement. The complete information on the trading products (securities) mentioned herein, in particular the structure and risks associated with an investment, are described in the base prospectus, together with any supplements, as well as the final terms. The base prospectus and final terms constitute the solely binding sales documents for the securities and are available under the product links. It is recommended that potential investors read these documents before making any investment decision. The documents and the key information document are published on the website of the issuer, Vontobel Financial Products GmbH, Bockenheimer Landstrasse 24, 60323 Frankfurt am Main, Germany, on prospectus.vontobel.com and are available from the issuer free of charge. The approval of the prospectus should not be understood as an endorsement of the securities. The securities are products that are not simple and may be difficult to understand. This information includes or relates to figures of past performance. Past performance is not a reliable indicator of future results.

2022-09-27 03:18:46

 

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