First six months with lower top-line and a doubling net loss ...
On August 24, Pro Kapital Grupp AS, a leading Estonian developer of commercial and residential real estate in the three Baltic countries of Estonia, Latvia and Lithuania released its unaudited report for the first six months of 2016. The numbers were below our expectations as all key figures were below the comparably high 2015 level flattered by an extremely high level of revenues from sales which had tripled from €2.3 mln in 2014 to €6.0 mln in 2015. The H1/2016 sales number was at €4.4 mln, which might be seen as a more “normalized†level. The EBIT was also much lower, at €-1.3 mln (1H 2015 €-0.4 mln). The net loss after minorities almost doubled from €-1.7 mln to €-3.1 mln in 1H 2016.
With regards to balance sheet the cash and cash equivalents doubled from €6.4 mln at year-end 2015 to €12.6 mln as of end-June 2016. In the same period the current bank debt quadrupled from €0.9 mln to €3.7 mln and the long-term bank debt came down from €6.9 mln to €3.7 mln. With a lower level of bank debt Pro Kapital worked more with the non-convertible bonds which doubled from €15.6 mln at year-end 2015 to €31.5 mln as of June 30.
A significant switch occurred in shareholder structure where Nordea Bank now holds a stake of almost 51% as of end-June (year-end 2015: 36%) which results in a lower free float but strongly underlines the trust of Nordea in the future success of Pro Kapital.
Based on 1H results and discussion with management we expect sales and bottom line to improve in the second half of the year. Nevertheless, we have to clearly cut our 2016 net result forecast from €-1.3 mln to €-5.3 mln and also take a more cautious view on 2017 and 2018 figures. With our updated P&L and DCF we reduce our target price to €2.50. In light of the current share price we reiterate our Buy rating.
Since 2007, BankM AG (Frankfurt am Main, Germany) is the partner of small and medium-sized enterprises and specializing in capital market financing with its experienced, interdisciplinary team. SME customers benefit from individual service and rapid access to selected investors that fit their needs. BankM's services include capital market advisory, arranging IPOs and capital increases for equity financing, debt advisory and debt capital mediation, designated sponsoring and research as well as M&A, hereby specializing in the identification of suitable strategic partners in China.
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