UBS has moved Mobimo to a sell recommendation from neutral, pointing to a near-term peak in development earnings and what it sees as an elevated valuation after the stock's recent run. The bank increased its 12-month price objective to CHF330 from CHF308, reflecting a lower weighted average cost of capital and slight upward adjustments to revenue projections for fiscal years 2025-27, but concluded the shares still offer limited upside.
Central to UBS's reassessment is the role of Mobimo's development business, which the broker identifies as the primary driver of recent profit growth and share-price performance. UBS expects development earnings to top out at about CHF50 million in fiscal 2025 - roughly 20% of group earnings before interest and tax - before dropping to just over CHF20 million annually from fiscal 2026 as the most profitable projects are completed.
UBS forecasts development margins near 31% in FY25, broadly unchanged from FY24 levels, but anticipates margin pressure thereafter. The bank notes that projects in Horgen and Oberägeri will run off, while developments such as Dietikon, Merlischachen and Köniz will make up a greater share of remaining profits, contributing to a reduction in overall margin.
Despite the expected peak in development income, UBS still projects a solid FY25 for the company, with adjusted earnings per share rising about 5% year on year. Looking further ahead, the broker models a decline in adjusted EPS of around 7% per year through fiscal 2028, driven primarily by reduced development contributions and only modest growth in rental income.
UBS expects net rental income to be roughly flat year on year in FY25 at about CHF124 million, with a gradual increase to CHF128 million in FY26 and CHF133 million in FY27. The firm emphasizes two constraints on organic rental growth: cuts to the Swiss reference interest rate and very low inflation. Residential rents account for about 40% of Mobimo's rental income and are expected to face headwinds from two reference rate reductions projected in FY25.
Approximately 60% of the group's rents are CPI-indexed, but UBS's inflation assumptions are modest - roughly 0.2%-0.3% for FY25-26 - limiting indexation-driven growth in rental receipts. On the commercial side, UBS highlights a vacancy rate of 5.7% as of the first half of fiscal 2025, and notes that revaluation gains in that period were driven mainly by residential assets rather than commercial properties.
Valuation dynamics played a decisive role in the downgrade. UBS says Mobimo shares trade at an unusually large premium to 12-month forward net asset value - about 18% - whereas the historical average has been a discount of about 6%. At the same time, the expected net dividend yield of roughly 2.6%-2.7% is described as broadly in line with peers, offering limited compensation for the premium valuation.
The broker expects the dividend to remain unchanged at CHF10.25 per share through its forecast period, reflecting payout ratios above 90% from FY26 and a loan-to-value ratio of 43.2% as of the first half of FY25.
Even after increasing its price target to CHF330 - a move driven by a lower WACC of about 3.5% and small upward revisions to revenue forecasts for FY25-27 - UBS calculates a total 12-month return of roughly negative 12%. That expected negative return led the firm to lower its recommendation to sell.
In sum, UBS's change in stance combines a view that development profits will peak in FY25 and then erode, modest near-term rental income growth constrained by interest rate and inflation dynamics, and a stretched market valuation that, in the broker's view, outweighs the company's dividend profile and near-term earnings strength.