Year-end report January – December 2025

Hemsö reported FY 2025 rental income of SEK 5,149m and profit from property management of SEK 2,541m (+2%), with operating cash flow up 6% to SEK 2,524m and profit after tax SEK 1,896m (prior SEK 1,886m). Property revaluations were negative at SEK -685m, while the portfolio market value rose to SEK 87,231m; SEK 3,521m was invested in the portfolio, 7 properties were acquired for SEK 631m and 7 divested for SEK 431m. The company highlights continued tenant demand and completed projects adding nursing‑home and school capacity, and retains investment‑grade ratings (S&P A-, Fitch AA-, Moody's A3) with management signaling an active 2026 pipeline.

Analysis

Market structure: Hemsö’s results show resilient cash flow (profit from property management SEK 2,541m; operating cash flow SEK 2,524m) and modest revaluation losses (-SEK 685m, ~0.8% of SEK 87.2bn portfolio), signalling that public-sector social infrastructure demand (schools, nursing homes) remains the stable winner while highly cyclic private-office REITs are the loser in a rising-rate/volatile-value environment. Competitive dynamics favour Hemsö’s long leases and public-tenanted mix, which reduce vacancy and tenant-credit risk and should compress earnings volatility vs. peers over 12–36 months, preserving pricing power for renewals in core municipalities.

Risk assessment: Key tail risks are a sudden 100–200bp spike in Swedish/German yields (would mark NAV down >5–10% via cap rates), a public-budget squeeze reducing municipal capex, or construction cost overruns on the SEK 3.5bn invested — any of which could turn modest valuation hits into earnings pressure within 3–12 months. Hidden dependencies include refinancing timing (next 12–36 months) and concentration in municipal counterparties; catalysts to watch: Swedish 10y yield moves >+50bp, municipal budget updates over next 60 days, and Hemsö refinancing calendar.

Trade implications: Favor income and credit exposure over speculative equity beta. Tactical: accumulate Hemsö senior bonds if spread over Swedish sovereign >+150bp (size 3–5% portfolio) and add 2–3% equity long if share price implies >5% discount to NAV, while shorting a more cyclical Swedish REIT (e.g., Castellum, CAST.ST) to neutralise macro beta. Use 9–12 month call spreads on Hemsö equity to express selective upside, or buy 12-month puts as hedge if 10y yields rally >+100bp.

Contrarian angles: Market may be underestimating operational growth from recently completed assets (2,860 school places, 217 nursing places) and Hemsö’s majority-owner AP3 support which reduces strategic downside — create a tactical overweight if equity falls >10% despite stable cash flow. Conversely, don’t dismiss a prolonged rate regime; deep cyclical REIT shorts will outperform if central banks re-tighten beyond current expectations.

Key Decisions for Investors

• Establish a 2–3% long position in Hemsö Fastighets AB equity (Nasdaq Stockholm) within 2–6 weeks if the share price trades at a >5% discount to company NAV or falls >8% intraday; target 12-month upside 10–15%, stop-loss at -12%.
• Allocate 3–5% portfolio to Hemsö 3–7 year senior unsecured bonds if spread >+150bp vs Swedish govt curve (or absolute yield >3.5%); hold to maturity unless credit watch changes over next 12–36 months.
• Implement a relative-value pair: long Hemsö equity (2%) vs short Castellum (CAST.ST) (1.6% sizing to be sector beta-neutral) to capture lower earnings volatility and higher public-sector tenancy, rebalance after 3 months or on 50bp move in 10y yields.
• Buy 9–12 month 15–20% OTM call spreads on Hemsö (size 0.5–1% notional) to play selective upside; alternatively purchase 12-month puts as a hedge if Swedish 10y yield rises >+100bp within 60 days.