Urbanization And Digital Living Will Reshape Helsinki Rental Markets

Key Takeaways

• Kojamo is poised for accelerated rent and occupancy growth due to tightening urban rental supply, innovative pricing strategies, and digitalization driving stronger customer retention.
  
• Optimized asset management, robust financial positioning, and strategic leadership changes set the stage for margin expansion and market share gains in a growing urban rental market.
  
• Kojamo faces challenges from urban market oversupply, rising costs, demographic constraints, high leverage, and increased regulatory and sustainability-driven expenses, all pressuring long-term profitability.

Catalysts

Operates as a private housing investment company in Finland.

• While analysts broadly agree that urbanization and low housing starts will tighten rental supply and support Kojamo's pricing power, they may be underestimating the pace and magnitude: recent evidence suggests oversupply growth has not only stalled but could reverse sharply, positioning Kojamo for accelerated rent increases and occupancy gains-leading to upside for both revenues and net operating income as early as the next 12-18 months.
  
• Analyst consensus sees Kojamo's digitalization and customer experience improvements supporting retention and modest rent premiums, but the company's record-high Net Promoter Score and sharp reduction in tenant churn point to a deeper transformation; this could unlock a durable rent premium and structurally lower turnover costs, driving operating margin expansion ahead of expectations.
  
• The recent major asset disposal and redeployment of proceeds into share buybacks, along with an exceptionally strong refinancing position and no short-term debt maturities, put Kojamo in a rare position to swiftly restore its dividend and deliver double-digit growth in earnings per share, even before any market recovery.
  
• Kojamo's highly dynamic and localized pricing strategies, enabled by new digital tools, mean the company can rapidly capitalize on tightening market segments, extracting rent growth in periods of renewed demand faster than its more traditional peers-amplifying top-line growth and improving real-time yield on assets.
  
• The leadership transition, accompanied by a thorough strategic review, signals likely portfolio optimization and operational streamlining; combined with Finland's accelerating urban population growth and rising preference for renting over owning, this paves the way for Kojamo to become the clear consolidator and outsized share-gainer in the high-growth urban rental market, supporting a step-change in long-term earnings power.

Kojamo Oyj Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Kojamo Oyj compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Kojamo Oyj's revenue will grow by 1.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 11.8% today to 69.7% in 3 years time.
• The bullish analysts expect earnings to reach €333.6 million (and earnings per share of €1.4) by about September 2028, up from €53.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 12.6x on those 2028 earnings, down from 50.2x today. This future PE is lower than the current PE for the FI Real Estate industry at 30.5x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.03%, as per the Simply Wall St company report.

Kojamo Oyj Future Earnings Per Share Growth

Risks

• Kojamo's concentrated focus on the Helsinki Metropolitan Area and other major cities leaves it vulnerable to stagnating or declining local demographics, as Finland experiences slow population growth and an aging demographic, potentially constraining long-term rental demand and impacting future revenue growth.
  
• Continued oversupply risk in the urban rental market, particularly in the capital region, is evident from management's own comments on persistent market oversupply and the need to use dynamic and flexible rent campaigns; this environment pressures rent levels and restricts Kojamo's ability to meaningfully grow revenues or sustain premium pricing.
  
• Company statements reveal growing pressure from increased maintenance and repair costs, including higher water, outdoor maintenance, and modernization investments, which have already been rising year-over-year and threaten to outpace rental income growth over time, weighing on net margins and long-term profitability.
  
• Kojamo continues to carry significant leverage and is reliant on refinancing several hundred million euros in debt maturing around 2027-despite recent repayments, the possibility of higher future interest rates or tightening financial conditions could further increase financial expenses and undermine future earnings.
  
• Management acknowledges the heightened significance of environmental and energy efficiency standards, including a public commitment to carbon neutrality by 2030, which implies substantial future capital expenditures and compliance costs that may dilute net margins and suppress longer-term earnings growth.

Valuation

• The assumed bullish price target for Kojamo Oyj is €12.5, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Kojamo Oyj's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €12.5, and the most bearish reporting a price target of just €6.9.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €478.8 million, earnings will come to €333.6 million, and it would be trading on a PE ratio of 12.6x, assuming you use a discount rate of 11.0%.
  
• Given the current share price of €10.95, the bullish analyst price target of €12.5 is 12.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.