77% top line growth in 2015
On April 20, Pro Kapital (ISIN EE3100006040, Open Market, 17E GF), a leading Estonian developer of commercial and residential real estate in the three Baltic countries of Estonia, Latvia and Lithuania released its audited annual report 2015.
The numbers have been favorable and ahead of our projections with a jump in revenues and an improving bottom line. For the full year, Pro Kapital reported a significant increase in total revenues of about 77%, even more than at half-year numbers (+67%) to €18.3 mln, after €10.3 mln in the year before, mainly driven by much higher trading activities. Real estate asset sales quadrupled from €2.7 mln in 2014 to €10.1 mln in 2015.
All in all, we welcome the 2015 figures since the €18.3 mln revenues were ahead of our €15.0 mln forecast. Further, the bottom line was less negative at €-1.8 mln, hence better than our €-3.4 mln projection. It is also noteworthy that the cash flow from operating activities turned positive from €-1.1 mln in 2014 to €3.5 mln in 2015. We are optimistic that Pro Kapital will be able to boost revenues once more to clearly above €20 mln in 2016 and to be in the black in 2017, at the latest. The company worked on its financing side by issuing a fixed rate secured bond at the volume of €13.4 mln with a five years maturity until 2020 and an effective annual 8% coupon which is favorable given the country risk profile.
On May 25, Pro Kapital released its 1Q 2016. Numbers were slightly below the 1Q 2015 as the previous year’s initial quarter was flattered by a relatively high amount of sales after the completion of a residential building. Net result was at €-1.5m (€-1.2m) but the first quarter is normally not decisive. It is noteworthy that operating cash flow improved from €-0.9m to €-0.2m.
We maintain our Buy rating for the Pro Kapital share and slightly lift our Target Price from €3.40 to €3.50, according to our DCF.
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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