Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Our outlook remains neutral for global ex-U.S. markets while horizontal consolidation continues on the MSCI ACWI ex-U.S. index.  In today’s report we take a bottoms-up view on developed ex-U.S. equities, highlighting stocks that present attractive buy opportunities within the Services, Consumer Discretionary, Consumer Staples, Energy, and Financials Sectors.

Our outlook remains neutral for global ex-U.S. markets while horizontal consolidation continues on the MSCI ACWI ex-U.S. index.  In today’s report we take a bottoms-up view on developed ex-U.S. equities, highlighting stocks that present attractive buy opportunities within the Services, Consumer Discretionary, Consumer Staples, Energy, and Financials Sectors.

Bottoms-Up View on Developed Markets: Actionable Stocks

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<a href="https://www.smartkarma.com/entities/fastighets-ab-balder" target="_blank" data-smartkarma-citation="entities:22289:1" rel="noopener">Fastighets Ab Balder (BALDB SS)</a> intends to make an offer to acquire the remaining 66.33% stake in <a href="https://www.smartkarma.com/entities/entra-asa" target="_blank" data-smartkarma-citation="entities:22229:1" rel="noopener">Entra ASA (ENTRA NO)</a> for NOK 24.5 bn after it crossed the 33.3% mandatory offer threshold on 12 October. Under the Offer, Balder intends to acquire the remaining 120,811,936 shares of Entra at NOK 202.5/share. Balder prefer Entra to continue to be listed on the Oslo Stock Exchange. The consideration represents 29x EV/EBITDA, 27.0x deal value/est. FFO, deal value/consensus NAV of 119.4% and c. 2.3% premium to EPRA NRV.
Swedish real estate firms <a href="https://www.smartkarma.com/entities/samhallsbyggnadsbolaget-i-norden-ab" target="_blank" data-smartkarma-citation="entities:31109:1" rel="noopener">Samhällsbyggnadsbolaget I Norden AB (SBBB SS)</a> and <a href="https://www.smartkarma.com/entities/castellum-ab" target="_blank" data-smartkarma-citation="entities:22321:1" rel="noopener">Castellum AB (CAST SS)</a> had previously tried to acquire Entra, but both withdrew their bids last February after their offers failed to win enough backing (see <a href="https://www.smartkarma.com/insights/entra-asa-competing-offers" target="_blank" data-smartkarma-citation="insights:45673" rel="noopener">Entra ASA: Competing Offers</a> and <a href="https://www.smartkarma.com/insights/entra-sbb-castellum-bidding-war-heats-up" target="_blank" data-smartkarma-citation="insights:46523" rel="noopener">Entra - SBB - Castellum: Bidding War Heats Up</a>).
Castellum acquired a 11.8% stake in Entra from the Norwegian government pension fund in August. The acquisition price was NOK 210/share and Castellum now holds a 30.6% stake. At that time, Balder still held a 30% stake.
The contest for Entra seems far from over. On 13 October, the shares closed at NOK 214.8, 6% above the intended mandatory offer price, and 2.3% above the price paid by Castellum when it acquired a 11.8% stake in August. Castellum may keep on acquiring shares before triggering the mandatory offer threshold.
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An improved bid could come from Castellum, up to a level of NOK 228/share, 15% premium to Entra’s Q2 2021 EPRA NRV, but would surely involve cash and shares.
Regarding takeover offers in Norway, the mandatory offer obligation is again triggered by acquisitions of shares representing more than 40% and 50% of the voting rights (repeat offer obligation).
</div>

Fastighets Ab Balder (BALDB SS) intends to make an offer to acquire the remaining 66.33% stake in Entra ASA (ENTRA NO) for NOK 24.5 bn after it crossed the 33.3% mandatory offer threshold on 12 October. Under the Offer, Balder intends to acquire the remaining 120,811,936 shares of Entra at NOK 202.5/share. Balder prefer Entra to continue to be listed on the Oslo Stock Exchange. The consideration represents 29x EV/EBITDA, 27.0x deal value/est. FFO, deal value/consensus NAV of 119.4% and c. 2.3% premium to EPRA NRV.
Swedish real estate firms Samhällsbyggnadsbolaget I Norden AB (SBBB SS) and Castellum AB (CAST SS) had previously tried to acquire Entra, but both withdrew their bids last February after their offers failed to win enough backing (see Entra ASA: Competing Offers and Entra - SBB - Castellum: Bidding War Heats Up).
Castellum acquired a 11.8% stake in Entra from the Norwegian government pension fund in August. The acquisition price was NOK 210/share and Castellum now holds a 30.6% stake. At that time, Balder still held a 30% stake.
The contest for Entra seems far from over. On 13 October, the shares closed at NOK 214.8, 6% above the intended mandatory offer price, and 2.3% above the price paid by Castellum when it acquired a 11.8% stake in August. Castellum may keep on acquiring shares before triggering the mandatory offer threshold.

An improved bid could come from Castellum, up to a level of NOK 228/share, 15% premium to Entra’s Q2 2021 EPRA NRV, but would surely involve cash and shares.
Regarding takeover offers in Norway, the mandatory offer obligation is again triggered by acquisitions of shares representing more than 40% and 50% of the voting rights (repeat offer obligation).


Balder/Entra ASA: Game of Thrones in Scandinavian Real Estate

In my Insight <a href="https://www.smartkarma.com/insights/entra-asa-competing-offers" target="_blank" data-smartkarma-citation="insights:45673" rel="noopener">Entra ASA: Competing Offers</a>, I highlighted that investors expected increased bids for <a href="https://www.smartkarma.com/entities/entra-asa" target="_blank" data-smartkarma-citation="entities:22229:1" rel="noopener">Entra ASA (ENTRA NO)</a>, from SBB or others, now that Entra was in play. I recommended long Entra, TP NOK194 (20% premium to Entra’s Q3 2020 EPRA NRV).
The bidding war has since heated up:
<ul>
<li>On 18 December, <a href="https://www.smartkarma.com/entities/castellum-ab" target="_blank" data-smartkarma-citation="entities:22321:1" rel="noopener">Castellum AB (CAST SS)</a> increased its bid for Entra by 13.9% to NOK 185 a piece in cash and shares, and signed SEK18.1 bn property deals with Blackstone.
<ul>
<li>The Norwegian government had agreed to sell its 8.24% stake in Entra to Castellum (15 million shares at NOK169 per share in cash). The price will be adjusted at the new offer price.</li>
</ul>
</li>
<li>On 23 December, SBB raised its cash (65%) and stock bid for Entra to NOK 190 per share (for a total of NOK34.6 bn), exceeding the last offer made by rival Castellum.</li>
</ul>
Entra has said it is prepared to engage with potential buyers and to discuss alternatives to the company’s independence strategy. It also hinted it was expecting other bids, as it recommended shareholders to "keep their options open for the time being".
<ul>
<li>It also appreciated the improved bid by SBB “The board appreciates the continued interest in Entra shown by SBB, and notes the improvement in the financial terms proposed relative to SBB’s earlier proposal”</li>
</ul>
SBB's bid is superior, not only is higher, but also offers a larger cash component.
<ul>
<li>32.2% premium to Entra's closing price on 23 November.</li>
<li>This represents 28.4x EV/Fwd EBITDA, 28.4x P/Fwd E, 26.7x, 26.7x deal value/est. FFO NSD, and 18.8% premium to EPRA's NAV as of 30 September.</li>
</ul>
Entra’s shares jumped 3.5% on the news and closed at NOK 195.5, indicating investors see potential for a higher bid.
To further complicate matters, there are now two shareholders, Folketrygdfondet (12%), which so far has refused to sell, and <a href="https://www.smartkarma.com/entities/fastighets-ab-balder" target="_blank" data-smartkarma-citation="entities:22289:1" rel="noopener">Fastighets Ab Balder (BALDB SS)</a> (15%) that can prevent any bidder from exceeding the 90% needed, and are, then in a powerful bargaining position.
Recommendation is LONG Entra.
<ul>
<li>Shares are trading 2.9% above SBB's offer (and c. 0.8% above my 28 November TP recommendation, NOK 194).</li>
<li>Downside limited by SBB's bid.</li>
<li>Bids for Entra could reach NOK200 per share.</li>
</ul>

In my Insight Entra ASA: Competing Offers, I highlighted that investors expected increased bids for Entra ASA (ENTRA NO), from SBB or others, now that Entra was in play. I recommended long Entra, TP NOK194 (20% premium to Entra’s Q3 2020 EPRA NRV).
The bidding war has since heated up:

On 18 December, Castellum AB (CAST SS) increased its bid for Entra by 13.9% to NOK 185 a piece in cash and shares, and signed SEK18.1 bn property deals with Blackstone.

The Norwegian government had agreed to sell its 8.24% stake in Entra to Castellum (15 million shares at NOK169 per share in cash). The price will be adjusted at the new offer price.


On 23 December, SBB raised its cash (65%) and stock bid for Entra to NOK 190 per share (for a total of NOK34.6 bn), exceeding the last offer made by rival Castellum.

Entra has said it is prepared to engage with potential buyers and to discuss alternatives to the company’s independence strategy. It also hinted it was expecting other bids, as it recommended shareholders to "keep their options open for the time being".

It also appreciated the improved bid by SBB “The board appreciates the continued interest in Entra shown by SBB, and notes the improvement in the financial terms proposed relative to SBB’s earlier proposal”

SBB's bid is superior, not only is higher, but also offers a larger cash component.

32.2% premium to Entra's closing price on 23 November.
This represents 28.4x EV/Fwd EBITDA, 28.4x P/Fwd E, 26.7x, 26.7x deal value/est. FFO NSD, and 18.8% premium to EPRA's NAV as of 30 September.

Entra’s shares jumped 3.5% on the news and closed at NOK 195.5, indicating investors see potential for a higher bid.
To further complicate matters, there are now two shareholders, Folketrygdfondet (12%), which so far has refused to sell, and Fastighets Ab Balder (BALDB SS) (15%) that can prevent any bidder from exceeding the 90% needed, and are, then in a powerful bargaining position.
Recommendation is LONG Entra.

Shares are trading 2.9% above SBB's offer (and c. 0.8% above my 28 November TP recommendation, NOK 194).
Downside limited by SBB's bid.
Bids for Entra could reach NOK200 per share.


Entra - SBB - Castellum: Bidding War Heats Up

Sweden

Fastighets AB Balder owns and manages commercial and residential properties in Sweden.  The Company maintains and rents apartments, offices, shops, banks, hotels and warehouses.  Balder manages the properties through regional offices.

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Fastighets Balder (BALDB SS)

Bottoms-Up View on Developed Markets: Actionable Stocks

Our outlook remains neutral for global ex-U.S. markets while horizontal consolidation continues on the MSCI ACWI ex-U.S. index. In today’s report...

Vermilion Research

Balder/Entra ASA: Game of Thrones in Scandinavian Real Estate

The contest for Entra seems far from over. An improved bid could come from Castellum, up to a level of NOK 228/share, 15% premium to Entra’s Q2...

Jesus Rodriguez Aguilar

Entra - SBB - Castellum: Bidding War Heats Up

SBB's offer superior to Castellum's. Entra hints other bids expected. is LONG Entra (trading 2.9% above SBB's, c. 0.8% above my 28 Nov TP...

Jesus Rodriguez Aguilar

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