Duna House - Slower Pace Of Growth?

Duna House -  Earnings Revision

Recommendation:  Accumulate (Prev: Buy)

Target price (12M): HUF 4,500 (Prev: HUF 4,750)

 

Slower pace of growth?

 

• In light of the development of the fundamentals (ie. slower growth profile for the Polish operation and the crippled home-saving account segment) and the positive share price performance this year (+13% YTD), we think the stock provides less attractive risk-return profile at current prices thus we downgrade our recommendation to Accumulate from Buy and cut our target price from HUF 4,750 to HUF 4,500 per share.

 

• We reviewed our estimates following the FY18 results and fine-tuned our model to account for the changes in investment properties, the outlook for Polish operation and the almost disappearing profit from home savings account (LTP). Now, we foresee a consolidated profit of HUF 2,063 million (+21% y-o-y) for 2019 and HUF 2,070 million for 2020, boosted mainly by completion of the development projects. We continue to expect material DPS from 2019 and 2020 profit which could be as much as HUF 410 (9.5% div. yield) in our best case scenario.

 

• The main changes in our forecast and valuation are the exclusion of gross profit of home-saving account related to the Hungarian Core operation (lowered FY 2019 Total Hungarian Core profit by ca. 20%), and muted growth for the Polish operation (the growth may come predominantly from M&A from now on). On the bright side, we valued and added Panorama project (ca. HUF 150 per share) to the development arm (total of HUF 770 per share) of Duna House Group, and increased the value of the real estate portfolio by ca. HUF 40 per share to HUF 417 per share due to asset acquisition in 2018.

 

• Valuation-wise, Duna House is trading at an adjusted P/E of 9.5x in our view vs. BUX of 10x. We adjusted both the numerator and the denominator of the P/E multiple in order to see the valuation related to the sustainable operation. In the denominator, we modified the share price that represents the underlying operation (current share price – value of development – value of real estate’s hold for investment purposes) / EPS from Hungarian and Polish operation excluding revaluation gains.

 

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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