Tekova - High dividend yield supports while we wait for profitability to settle
Tekova’s Q4 was strong but EBIT guidance for 2026 was wide. Current year is likely to be a gap year after very strong 2025, but it will reveal the profitability of real estate development. A high dividend yield of almost 7% supports positive rating, but we cut profitability estimates for the coming years.
Q4 was strong
Last quarter of 2025 was a strong end to the year. Q4/2025 revenue grew to EUR 30.5m increasing 41.9% year-on-year. Fourth quarter revenue was 27% higher than we expected. The main reason was that Tekova’s datacenter project, which is the largest project in the company’s history, grew in scope during the construction phase. The original contract value grew form EUR 17m to over EUR 30m, and most of the revenue was recognized during 2025. EBIT was in line with expectations at EUR 2.5m (Evli EUR 2.6m). The company also communicated new guidance where it expects 2026 revenue to be EUR 90-115m and EBIT to be EUR 6.5-11.0m. We interpret the wide EBIT range is being set to ensure the lower limit is cleared under any circumstance.
New financial targets and dividend policy
Company updated its financial targets and dividend policy the day before Q4 report. Old financial targets focused on growing profits year by year and prioritize profitability over growth. Updated targets aim to grow profits and pursue growth but still prioritize profitability over growth. New targets leave room for profits decline. The earlier dividend policy was set to pay an increasing dividend and now Tekova strives to pay a dividend of 40-60% of net income. With new policy, Tekova ensures payout ratio doesn’t increase too high to hamper its ability to invest in real estate development projects.
Profitability levels got checked downwards
After strong 2025 it’s hard to exceed last year results in 2026. We now estimate that H1 revenue will be strong and grow form last year but revenue will decline in H2 compared to the year before. For the whole year we now estimate revenue of EUR 100m (vs. old estimate of EUR 109m). We believe that Tekova will return to growth during the next year and estimate modest revenue growth of 5% for 2027.
We cut our EBIT margin estimate by 50 basis points to reflect lower profitability of contracting. Declining revenue is also working against Tekova in 2026 through the fixed costs. On a positive side, we estimate that 25% of the 2026 revenue will be from self developed projects versus only 4% in 2025. Tekova will recognize development profit when a self-developed project is handed over to the customer. Handovers are likely to happen on the Q2, Q3 and Q4. It is still unclear how much development profit Tekova will gain but currently we estimate that it will be EUR 1.5m meaning additional 6% on top of the contracting profit. Year 2026 EBIT estimate is now EUR 8.8m, 22% below our old estimate. We cut our 2027 EBIT estimate by 13% to EUR 9.8m. Growing revenue will help with the fixed costs next year and we expect development profits to be at the same level as 2026.
Downgrade from BUY to ACCUMULATE with a target price of 1.45
We lower our target price to EUR 1.45 (EUR 1.7) and change rating ACCUMULATE (BUY). Valuation is still low but wide guidance leaves question marks for 2026. With current EPS estimates P/E ratio for 2026 and 2027 is 8.4 and 7.3. We see P/E of 8 as a fair level until profitability of real estate development is proven. Current dividend yield of 6.7 % contributes meaningfully to expected return while we wait to see how profitability for 2026 unfolds.