Download PDF

1. Company Snapshot

1.a. Company Description

Skanska AB (publ) operates as a construction and project development company in the Nordic region, Europe, and the United States.It operates through three segments: Construction, Residential Development, and Commercial Property Development.The Construction segment builds bridges, roads, harbors, quays, hospitals, residences, and schools.


The Residential Development segment develops and sells residential projects, including single and multi-family housing.The Commercial Property Development segment initiates, invests in, develops, leases, and divests in commercial properties.It also produces asphalt, gravel, rock, concrete gravel, road construction materials, macadam, and concrete.


In addition, the company engages in the construction and renovation of buildings; provision of infrastructure services, including operation, maintenance, and construction work; stone preservation; and rental of machines and equipment.Skanska AB (publ) was founded in 1887 and is headquartered in Stockholm, Sweden.

Show Full description

1.b. Last Insights on SKA

Skanska's recent performance is driven by growing confidence in its potential, reflected in an increased fair value estimate from SEK 254.25 to SEK 268.00. The company's selective strategy in the US construction market, particularly in data centers and semiconductors, is a key growth driver. Recent contracts, including a USD 178M road improvement project at Los Angeles International Airport and a USD 148M standby power generation facility in Newark, New Jersey, have boosted order bookings. Additionally, leadership promotions and expansion into new markets, such as Slovakia, have contributed to a positive outlook.

1.c. Company Highlights

2. Skanska's Q4 Results: A Mixed Bag with Bright Spots

Skanska's financial performance for the fourth quarter and full year was marked by a revenue increase of 7% year-on-year, reaching an operating margin of 4.1% for the full year. Earnings per share (EPS) came in at 4.43, below analyst estimates of 6.1. The company's Construction business achieved an all-time high construction margin of 5.6% in the quarter, driven by strong order bookings and a historically high order backlog of SEK 258 billion. As noted by Pontus Winqvist, "the company generated strong cash flow in the quarter, with SEK 2.5 billion."

Publication Date: Feb -10

📋 Highlights
  • Construction Margin & Order Backlog:: Achieved a 5.6% operating margin in Q4 (4.1% full-year), with a record order backlog of SEK 258 billion and a 105% book-to-build ratio.
  • Commercial Property Divestments:: Sold 8 projects for SEK 4.6 billion in Q4, maintaining 72% occupancy for completed properties and contributing to strong cash flow.
  • Residential Inventory Reduction:: Reduced unsold inventory to 358 homes, despite a weaker Nordic market and 1.8% operating margin in the quarter.
  • Dividend Proposal:: Proposed SEK 14/share (SEK 8.5 ordinary + SEK 5.5 extra), reflecting a 93% payout ratio if approved at AGM.
  • Financial Position:: Maintained robust liquidity with SEK 11.5 billion adjusted net cash, SEK 2.5 billion quarterly cash flow, and SEK 28.6 billion available funds.

Segment Performance

The company's various segments showed mixed results. Residential Development experienced a weaker market in the Nordic region, with an operating margin of 1.8% in the quarter. However, the company was able to reduce inventory to 358 homes. Commercial Property Development had a good divestment quarter, with 8 projects sold for SEK 4.6 billion. Investment Properties maintained a stable result, with an occupancy rate of 85%.

Cash Flow and Dividend

Skanska's cash flow was strong, with SEK 2.5 billion generated in the quarter. The company proposed a dividend of SEK 14 per share, consisting of SEK 8.5 in ordinary dividend and SEK 5.5 in extra dividend. The dividend yield is 3.0%, which is relatively attractive. With an adjusted net cash position of SEK 11.5 billion, the company's financial position remains robust.

Valuation

Skanska's valuation metrics indicate a relatively stable picture. The P/E Ratio is 19.36, and the P/B Ratio is 1.79. The EV/EBITDA ratio is 9.95, suggesting a reasonable valuation. With an ROE of 9.4% and an ROIC of 6.1%, the company is generating decent returns on equity and invested capital. Analysts estimate next year's revenue growth at 4.7%, which is slightly above the current valuation multiples.

Outlook

The company's market outlook remains unchanged, with variations in different segments. Construction in the U.S. and Sweden is expected to continue being strong, while the building market in the rest of Europe is stable. Residential Development in Central Europe is expected to be strong, while it is weaker in the Nordics. Skanska is well-positioned to take advantage of the market, particularly in data center projects.

3. NewsRoom

Card image cap

Skanska tops out $435M Florida hospital project

08:33

Source:

Card image cap

Why The Skanska (OM:SKA B) Investment Narrative Is Shifting On Subtle Valuation Tweaks

Mar -12

Source:

Card image cap

Skanska builds Pedestrian Bridge and Promenade Gateway in Los Angeles, USA, for USD 102M, about SEK 920M

Mar -11

Source:

Card image cap

Skanska JV nabs $534M LA bridge deck replacement

Feb -12

Source:

Card image cap

Skanska wins $373m contract to redevelop London’s One Appold Street

Feb -11

Source:

Card image cap

Skanska replaces Vincent Thomas Bridge deck in Los Angeles, USA, for USD 320M, about SEK 2.9 billion

Feb -11

Source:

Card image cap

Skanska (OM:SKA B) Valuation Check After Recent Share Price Softness

Feb -10

Source:

Card image cap

Skanska builds major commercial office building in London, UK, for GBP 273M, about SEK 3.4 billion

Feb -10

Source:

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.48%)

6. Segments

Construction

Expected Growth: 4.5%

Skanska AB's 4.5% growth in Construction segment is driven by increasing infrastructure investments, urbanization, and government initiatives. Strong order bookings, efficient project execution, and strategic acquisitions also contribute to growth. Additionally, the company's focus on sustainable and green construction, as well as its expertise in public-private partnerships, position it for continued growth in the sector.

Reconciling Items

Expected Growth: 3.5%

Skanska AB's 3.5% growth is driven by increasing infrastructure investments, urbanization, and a strong order backlog. The company's focus on sustainable and green construction, as well as its diversified business model, contribute to its growth. Additionally, strategic acquisitions and a solid financial position enable Skanska to capitalize on emerging trends and opportunities.

Residential Development

Expected Growth: 5.5%

Skanska AB's 5.5% growth in Residential Development is driven by increasing demand for sustainable and urban housing, strategic land acquisitions, and efficient project execution. Additionally, the company's focus on mixed-use developments and partnerships with local authorities contribute to its growth momentum.

Commercial Property Development

Expected Growth: 4.8%

Skanska AB's Commercial Property Development segment growth of 4.8% is driven by increasing demand for sustainable and energy-efficient buildings, strategic project acquisitions, and a strong pipeline of developments in urban areas. Additionally, the company's focus on mixed-use projects and public-private partnerships contributes to its growth momentum.

Investment Properties

Expected Growth: 4.2%

Skanska AB's 4.2% growth in Investment Properties is driven by increasing demand for sustainable and energy-efficient buildings, strategic acquisitions, and expansion into new markets. Additionally, the company's focus on urban development and mixed-use projects, as well as its strong order backlog, contribute to its growth momentum.

Central

Expected Growth: 4.0%

Central from Skanska AB (publ) achieves 4.0% growth driven by increasing infrastructure investments, urbanization, and government initiatives. Strong project pipeline, efficient operations, and strategic acquisitions also contribute to growth. Additionally, the segment benefits from a diversified portfolio, including residential and commercial developments, which mitigates risks and enhances profitability.

7. Detailed Products

Residential Development

Skanska develops and sells residential projects, including apartments and houses, in Sweden, Norway, and the UK.

Commercial Property Development

Skanska develops and manages commercial properties, including offices, logistics, and retail spaces, in Europe and the US.

Infrastructure Development

Skanska designs, builds, and maintains infrastructure projects, such as roads, bridges, and railways, in Europe and the US.

Construction Services

Skanska provides construction services, including building, civil engineering, and mechanical and electrical installations, in Europe and the US.

Public Private Partnerships (PPPs)

Skanska develops and manages PPP projects, including transportation, healthcare, and education facilities, in Europe and the US.

8. Skanska AB (publ)'s Porter Forces

Forces Ranking

Threat Of Substitutes

Skanska AB (publ) operates in the construction industry, where substitutes are limited. However, the company faces competition from other construction companies, which can be considered as substitutes.

Bargaining Power Of Customers

Skanska AB (publ) has a diverse customer base, which reduces the bargaining power of individual customers. Additionally, the company's strong brand reputation and quality of services reduce the customers' ability to negotiate prices.

Bargaining Power Of Suppliers

Skanska AB (publ) relies on various suppliers for materials and services. While the company has some bargaining power due to its large scale, suppliers can still exert some pressure on prices and delivery terms.

Threat Of New Entrants

The construction industry has high barriers to entry, including significant capital requirements and regulatory hurdles. This limits the threat of new entrants and gives Skanska AB (publ) a competitive advantage.

Intensity Of Rivalry

The construction industry is highly competitive, with many established players competing for market share. Skanska AB (publ) faces intense rivalry from other construction companies, which can lead to pricing pressure and reduced margins.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 17.24%
Debt Cost 5.68%
Equity Weight 82.76%
Equity Cost 9.77%
WACC 9.06%
Leverage 20.83%

11. Quality Control: Skanska AB (publ) passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Acciona

A-Score: 6.4/10

Value: 5.4

Growth: 7.6

Quality: 3.9

Yield: 5.6

Momentum: 9.0

Volatility: 6.7

1-Year Total Return ->

View Full Report
Stock-Card
Balfour Beatty

A-Score: 6.3/10

Value: 5.2

Growth: 6.1

Quality: 4.8

Yield: 3.8

Momentum: 9.0

Volatility: 9.0

1-Year Total Return ->

View Full Report
Stock-Card
Sacyr

A-Score: 6.1/10

Value: 4.7

Growth: 5.7

Quality: 3.6

Yield: 7.5

Momentum: 6.5

Volatility: 8.7

1-Year Total Return ->

View Full Report
Stock-Card
Skanska

A-Score: 5.8/10

Value: 6.3

Growth: 4.1

Quality: 5.5

Yield: 5.6

Momentum: 5.5

Volatility: 8.0

1-Year Total Return ->

View Full Report
Stock-Card
SPIE

A-Score: 5.8/10

Value: 4.3

Growth: 6.1

Quality: 3.5

Yield: 4.4

Momentum: 9.0

Volatility: 7.3

1-Year Total Return ->

View Full Report
Stock-Card
Webuild

A-Score: 5.5/10

Value: 6.8

Growth: 6.3

Quality: 3.0

Yield: 5.0

Momentum: 7.0

Volatility: 5.0

1-Year Total Return ->

View Full Report

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

257.0$

Current Price

257$

Potential

-0.00%

Expected Cash-Flows