Castellum AB: A Compelling Buy in Undervalued Nordic Industrial Real Estate

The Nordic industrial real estate sector has long been a cornerstone of value investing, offering stable cash flows and inflation-linked returns. Among the region’s key players, Castellum AB (STO:CAST) stands out as a compelling opportunity for investors seeking exposure to undervalued assets. Despite a challenging macroeconomic environment, Castellum’s strategic acquisitions, robust balance sheet, and attractive valuation multiples position it as a prime candidate for immediate investment.

Operational Resilience Amid Headwinds

Castellum’s first-half 2025 results underscore its operational resilience. Total income for the period reached SEK 4,789 million, slightly below the prior year’s SEK 4,977 million but supported by aggressive reinvestment. The company allocated SEK 2,823 million to net investments, including SEK 1,700 million in acquisitions across regional cities like Uppsala, Örebro, and Linköping [1]. These moves align with Castellum’s long-term strategy to capitalize on urbanization trends and industrial demand in secondary markets.

While property income and net operating income (NOI) declined by 8.7% and 5.5% respectively year-over-year, the company’s return on equity (ROE) improved dramatically to 3.4% from -9.7% in the prior year [1]. This turnaround reflects disciplined cost management and a focus on high-yield assets.

Strong EBITDA and Attractive Valuation Multiples

Castellum’s financial strength is further evidenced by its LTM EBITDA of SEK 6.4 billion, translating to a 65.45% EBITDA margin [6]. This operational efficiency is rare in the real estate sector and underscores Castellum’s ability to generate cash flow despite macroeconomic pressures.

Valuation metrics paint an even more compelling picture. At a market capitalization of SEK 51.79 billion and enterprise value (EV) of SEK 110.93 billion as of September 5, 2025 [1], Castellum trades at a P/EBITDA of ~17.3x and a P/NAV of ~0.325x (based on a portfolio value of SEK 159 billion) [6]. These multiples are starkly lower than industry averages of ~25x EV/EBITDA and ~1.2x P/NAV, suggesting significant undervaluation.

For context, Campine NV, a European deep-value industrial real estate peer, trades at a 4x EV/EBITDA despite similar operational challenges [4]. Castellum’s valuation appears even more attractive when considering its 36.7% debt-to-value ratio and 3.2x interest coverage, which provide ample financial flexibility for growth [1].

Intrinsic Value and Strategic Momentum

Discounted cash flow (DCF) and relative valuation models further reinforce the case for Castellum. The stock is estimated to be undervalued by 43% compared to an intrinsic value of SEK 183.86, with a DCF valuation of SEK 144.57 and a relative valuation of SEK 223.14 [6]. At the current price of SEK 105.25, the margin of safety is substantial.

Strategically, Castellum has positioned itself to benefit from structural trends. Its recent SEK 10 billion secured debt refinancing reduced the average interest rate to 3.2%, saving SEK 20 million annually [1]. This cost discipline, combined with a focus on regional markets with lower supply-demand imbalances, enhances long-term returns.

Risks and Mitigants

Critics may point to the 8.7% decline in property income and 90-basis-point increase in EPRA vacancy rates [2]. However, these metrics reflect broader industry headwinds rather than operational missteps. Castellum’s proactive approach—such as its SEK 1.7 billion acquisition spree in high-growth regions—positions it to outperform peers as demand normalizes.

Conclusion: A Buy for Value-Driven Investors

Castellum AB offers a rare combination of strong operational performance, attractive valuation multiples, and strategic momentum. Its undervaluation relative to intrinsic value and peers, coupled with a conservative balance sheet, makes it an ideal candidate for value investors. With the Nordic industrial real estate sector poised for recovery, Castellum’s current valuation represents a compelling entry point.

Investment Recommendation: Buy.

Source:
[1] Half-year report January-June 2025 [https://www.castellum.com/media/press-releases/press-release?slug=half-year-report-january-june-2025]
[2] Castellum reports Q4 net asset value ahead of estimates, reinstates dividend [https://www.investing.com/news/stock-market-news/castellum-reports-q4-net-asset-value-ahead-of-estimates-reinstates-dividend-3876384]
[4] Campine NV - European deep value play with strong ... [https://www.reddit.com/r/ValueInvesting/comments/1lo478m/campine_nv_european_deep_value_play_with_strong/]
[6] CAST Intrinsic Valuation and Fundamental Analysis [https://www.alphaspread.com/security/sto/cast/summary]