The share

Castellum’s goal is for the company’s share over the long term to yield a competitive return in relation to risk, and to have a high level of liquidity. The risk level should be lower than the industry average. All actions are based on a long-term perspective and the company presents frequent, transparent, true and fair financial statements to shareholders, capital and credit markets, and the media that facilitate external assessment and evaluation of the company and the share.

Castellum has a goal of 10% yearly growth in income from property management. The outcome for 2020 was 7%, and over the last ten years the average yearly increase was 7%.

The Castellum share

Castellum is one of the major listed property companies in Sweden. Since 1997, the company’s share has been listed on Nasdaq Stockholm Large Cap under the symbol CAST. The Board intends to propose that the Annual General Meeting approve a dividend of SEK 6.90 per share, an increase for the 23rd consecutive year.

Castellum’s market capitalisation (i.e. the value of all shares outstanding in Castellum) amounted to SEK 57.9 billion (60.1), as of December 31, 2020. This corresponds to approximately 11% of the total market capitalisation, SEK 528 billion, of dedicated Swedish property companies. Furthermore, Castellum’s market capitalisation corresponds to approximately 1% of the total market capitalisation – approximately SEK 9,297 billion – of all listed Swedish companies.

The number of Castellum shares outstanding is 277,092,708 (273,201,166). In 2020, a total of 286 million (270) shares were traded, equivalent to an average of 1,137,000 shares (1,080,000) per trading day, corresponding on an annual basis to a turnover rate of 104% (99). The share turnover is based on statistics from Nasdaq Stockholm, Cboe CXE EU, Turquoise and Cboe BXE EU.

Proposed dividend

The Board intends to propose to the Annual General Meeting to approve a dividend of SEK 6.90 per share, an increase of 6% year-on-year. The dividend is proposed to be distributed to the shareholders in two equal payments of SEK 3.45 each. The payout ratio amounts to 56%, based on income from property management before tax.

If the Annual General Meeting approves the Board’s proposal, the record date for the first dividend will be Monday, 29 March 2021. This means that the final day for trading shares including the dividend is Thursday, 25 March 2021.

Record date for the second dividend is Monday, 27 September 2021, meaning that the final day for trading shares including the dividend is Thursday, 23 September 2021. The first dividend is planned for Thursday, 1 April 2021, and the second dividend is planned for Thursday, 30 September 2021.

The proposed dividend, equivalent to 56% of income from property management and 3% of the net asset value, exceeds Castellum’s objective of distributing at least 50% of income from property management, taking into account investment plans, consolidation needs, liquidity and financial position in general. Unrealised changes in value, positive or negative, are thus not included in the distributable earnings.

Net asset value

Net asset value describes the total equity that the company manages for its owners. On this basis, Castellum wants to generate stable return and growth at low financial risk. When assets and liabilities are measured at fair value, the net asset value can be calculated using shareholders’ equity in the balance sheet. It should be taken into account, however, that the effective tax is lower than the reported nominal tax rate, due in part to the possibility of selling properties in a tax-efficient manner, and in part to the time factor which means the tax is to be discounted.

Long-term net reinstatement value (EPRA NRV) can be calculated to SEK 214 per share (195). The share price at the end of the year was thus 98% (114) of the long-term net reinstatement value.

Earnings

Income from property management per share, adjusted for tax attributable to income from property management (EPRA EPS) amounted to SEK 11.25 (10.44). Based on the share price, this resulted in a yield of 5.4% (4.7) corresponding to a multiple of 19 (21). This visible income from property management should be adjusted for long-term increase in value of the property portfolio and effective tax paid.

Earnings per share after tax amounted to SEK 20.52 (20.68) in 2020. Based on the share price, this yields a return of 9.8% (9.3) corresponding to a P/E ratio of 10 (11).

Total yield

Total yield reflects the development of the share price plus dividends paid during the period.

The Castellum share price at year end was SEK 208.70 (222.00), equivalent to a market capitalisation of SEK 57.9 billion (60.1) calculated on the number of shares outstanding. The total return on the share in 2020, including dividend of SEK 6.50, was –1.6% (38.9).

Dividend yield

Dividend yield – the company’s dividend divided by the current share price – represents the yield shareholders receive in cash every year following the resolution by the Annual General Meeting. The key ratio thus expresses the relationship between two different “spheres”: Castellum’s performance in the form of dividends and the stock market’s pricing of the company. The valuation thus reflects the market’s view of the dividend yield required to achieve a total return that matches the required market yield for the Castellum share.

The proposed dividend of SEK 6.90 (6.50) corresponds to a dividend yield of 3.3% (2.9) based on the share price at the end of the year.

The Castellum share’s price trend and turnover from the IPO on 23 May 1997 until 31 December 2020

Net asset yield and earnings incl. long-term change in value

In companies managing real assets, such as property, the income from property management only reflects part –albeit a large part – of the overall result. The definition of a real asset is that its value is protected. This means that over time – and with proper maintenance – the real asset increases in value to compensate for inflation.

The net asset value (i.e. the denominator of the income/capital yield ratio) is adjusted annually in accordance with IFRS regulations for changes in value. In order to provide an accurate figure of the yield, the numerator – that is, the income – must be similarly adjusted. The income from property management reported must therefore be supplemented with a component of change in value as well as effective tax to produce an accurate view of income and yield.

One problem is that changes in value can vary greatly between years and quarters, thus leading to volatile results. For a long-term player with a stable cash flow and a properly compiled asset portfolio, the long-term change in value can be used to adjust the numerator in the equation.

Shareholder value created

At the IPO in May 1997, Castellum’s asset portfolio amounted to approximately SEK 10 billion, income from property management to approximately MSEK 300 and shareholders’ equity to approximately SEK 4 billion. Since then, Castellum has created shareholder value by increasing shareholder’s equity to SEK 59 billion and dividends of approximately SEK 14.9 billion have also been distributed as of 31 December 2020. The asset portfolio grew over the same period to approximately SEK 103 billion at the end of 2020, while income from property management increased to SEK 3.3 billion.

Valuation

The investor’s required yield for a given share forms the basis for valuation over the long term. The required yield is based on the required yield for secure investments plus a risk premium for shares. The risk premium, and thus the required yield varies from share to share as well as over time. This is partly due to the risk investors perceive with a particular company, which they want to be compensated for: the higher the risk, the higher the required yield. Depending on the investor’s – or rather the investor collective’s – assessment of the share’s future total return (dividend yield plus change in share price) and risk level, an acceptable share price will emerge.

Over the short term, supply and demand for the share in question affect share price movements and set the current share price. Factors affecting price in the short term (apart from current investor assessments of the share’s long-term yield) include industry outlook, macroeconomic assessments, geopolitical events, allocation aspects, the potential yield on alternative investments, and regulations. Over the long term, the company’s actual performance in terms of total return and growth become crucial to share price development. As shown in the table on page 77, Castellum has achieved a total average yield of 14% per year over the past ten years, of which dividend yield represents approximately 4% and share price development around 10%, with a risk level for the Swedish property market that is moderate. The average dividend growth for the same period amounted to 9% per year.

Shareholders

Castellum had approximately 85,000 shareholders (57,000) at year end, an increase of roughly 49% compared with year-end 2019. The proportion of registered shares abroad amounted to 48% (55) at the end of the year. The largest owner constellations confirmed as of 31 December 2020, are shown in the table below.

Listed property companies

Castellum’s property value and income from property management since the IPO, 1997

Investor Relations

Investor relations are primarily based on quarterly financial reports, press releases related to significant commercial events and presentations by Castellum. Presentations take place in connection with quarterly financial reports, visits from investors and analysts, and investor meetings both in Sweden and abroad. The large share of foreign shareholders means that there are extensive contacts with foreign investors. Additional market and financial information is provided on the Group’s website, www.castellum.com.

Acquisitions and transfers of own shares

The 2020 Annual General Meeting gave a mandate to the Board up untilthe next Annual General Meeting to acquire and transfer shares. The acquisitionmay include no more than the number of shares that corresponds at any time to 10% of the total number of shares outstanding. In May 2020, 170,203 shares were repurchased at an average price of SEK 165.12. On 31 December 2020, the company’s holding of treasury shares amounted to 170,203 shares corresponding to 0.06% of the number of shares registered. During the fourth quarter, a share issue in kind of 4,061,745 shares was carried out in conjunction with the acquisition of a property group in Helsinki, Finland.

Shareholders distributed by country, 31 Dec 2020

Share price/net asset value

Yield, earnings per share

Dividend yield