Stenhus Fastigheter: On the right track - ABG

* Room for M&A to drive earnings growth* Funding costs are coming down significantly* 2026e P/CEPS 10x vs. coverage average of 15xSolid operational performance in Q3Stenhus delivered solid Q3 results with rental income 2% ahead of our estimate, while the NOI margin was up 1.8pp y-o-y to 82.6%, resulting in NOI 3% ahead of our estimate. Central administration costs were largely in line with our expectations, while net financials were slightly higher, resulting in rec. PTP 1% ahead of our estimate. Occupancy improved by 0.4pp q-o-q to 92.8%, while net letting was slightly negative at SEK -2.3m. We make positive CEPS revisions of 5-7% for 2026e-2027e, driven by lower operating and financial costs.EC IFPM p.s. up ~13% q-o-qDuring the quarter Stenhus has divested one development property, and two more after the quarter end for SEK >350m. Being largely vacant the impact on rental income and net operating income is negligible, while it creates headroom for cash earnings accretive acquisitions and share buybacks. With the bond refinancing completed in Q4, net financials in the earnings capacity decline by ~6% q-o-q, which combined with share buybacks and acquisitions boosts IFPM per share in the earnings capacity by ~13% q-o-q. Net LTV stands at 53.3%, and we have the impression that the company aims to have a net LTV of 55-60%; assuming the mid-point the potential investment volume is ~SEK 1.2bn. Assuming NIY in line with the current average valuation yield (~6.1%) and current funding terms (swap 250bp + margin 175bp), this could drive CEPS estimates by >10%.2026e P/CEPS 10x vs sector at 15xThe share is trading at a 2026e P/CEPS of 10x vs. the average in our coverage of 15x, and a P/EPRA NRV of 0.6x compared to the average in our coverage at 0.8x. Moreover, we expect the company to deliver average cash earnings growth of 11% in 2026e-2027e vs. the sector at 9%, where we see potential for Stenhus to drive earnings growth further through M&A.