Duna House - Asset Management’S Contribution Soared

Duna House -  Instant Earnings comment

Recommendation:  Accumulate

Target price (12M): HUF 4,500

 

Asset management’s contribution soared

 

In short: Duna House Q1 profit arrived to HUF 166 million (-74% y-o-y) this large drop is attributable to the strong Q1 performance last year when the company booked large part of the sale of Revizcky project (one of the development project). Excluding that, Core operation was really strong and increased by ca. 11% y-o-y to HUF 166 vs. HUF 157 million which is surprisingly strong if we take into account that one of the segment has basically disappeared (Home-Savings Account (HSA) intermediation). One of the largest contributor was the other related segment (Impact Asset management) which added ca. HUF 56 million. Management confirmed its FY profit guidance, but cautioned that potential delays may occur in the development segment due to labour shortages.

 

Financials: Profit (-74% y-o-y) and EBIT (-68% y-o-y) came lower than a year ago mainly due to the lack of booked project completion this quarter. As result EBIT margin fall to 13% vs. 29% last year Q1.

In a segment breakdown, obviously other related segment has achieved the best performance growing by ca. 631% y-o-y to HUF 64 million from HUF 9 million on EBIT level thanks to mainly to the large contribution from asset management (EBIT margin jumped to 46% from 11% in 2018 Q1). The Fund achieved a 3% return in Q1 and had an average NAV of 4.2 billion. One may expect the strong performance to continue, especially, as the Fund’s NAV has increased by 17% since Q1 to ca HUF 5 billion.  As for the other business lines, franchise segment has increased by 53% y-o-y to HUF 63 million. Loan intermediation segment’s EBIT which includes the segment of HSA, fall by 32% to HUF 70 million, which drop was expected. Investors should follow this segment as the synergies of the recently acquired Gold finance in Poland should materialize in this line from Q2.

 

On the country breakdown, Polish operation remained in the red (HUF -52million) in this quarter, similarly to Q4. As for the Hungarian Operation, it reached a profit of HUF 224 million in Q1 which if continues DH could easily achieve our forecasted FY profit of HUF 978 million.

 

Monthly transaction number according to DH’s estimation

 

Source: Company reports

 

Cumulative transaction numbers in Q1 came slightly lower (-1% y-o-y) compared last year’s same quarter. We are in a view that the latest gov’s measure to further support families should add impetus to transaction numbers but only after July when it comes to force. Until then, participants may await until the middle of the year to benefit from the new program deferring their purchase.

 

Developments: Management cautioned that there could be delays in the completions of the projects given the shortage of labour. Apart from that, 71% of Forest Hill project’s flat has already been sold and the completions may start from July. The other project which should contribute to the bottom-line -  MyCity Residence’s should be completed by the end of October. For this project ca. 74% of the flats have been sold.

 

Opinion: It is clearly a decent result from Duna House, since the company was able to offset the missing profit of the HSA segment. What is more, we expected ca. HUF 70 million increase from other related segment for full year, but the company almost managed achieve that growth only in Q1 (HUF 55 million).

We would like to highlight that the Group has become even more exposed to the general house price increase in Hungary, as ca. 16 – 20% of EBIT arrived from the asset management arm of the group which contribution could be volatile later on. In light of the decent result, we reiterate our target price and recommendation but highlight that if the asset management arm of the group continues to perform this well, DH may exceed our FY profit forecast for the Hungarian Core operation by ca. 4-5%.

 

 

Quarterly P&L

Source: company reports

 

 

Gellert Gaál
Equity analyst

CONCORDE SECURITIES LTD.

Hillside
55-61 Alkotás street, H-1123 Budapest.
Phone:
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MEMBER OF THE CONCORDE GROUP

 

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