Duna House - Temporarily Slowdown In The Hungarian Loan Intermediation?

Duna House -  Equity Note

Recommendation:  Buy

Target price (12M): Under revision

 

   Temporarily slowdown in the Hungarian loan intermediation?

 

Duna House published its Q4 KPI’s Thursday post market. There were three main points that we would like to highlight.

 

• One is the jump in the intermediated loan (+184% y-o-y) in Poland as a result of consolidation of the recently acquired Gold Finance (loan broker). It is nice to see, that the volume effectively tripled in a year, but we are rather interested in whether financials would follow the improvement, and that this additional volume would be enough to cover the Cost of equity for DH. After the transaction, Management guided that the acquisition was value creative due to economies of scale, and expected a payback period of 3-4 years, implying a 20-25% return on investment. Additionally, management also highlighted that positive results will only be seen in Q1 as Q4 will be subdued by non-recurring cost related to the acquisition.

 

• The second is a rather negative, and is also related to the loan intermediation segment, but to the Hungarian operation. Intermediated loan volume has materially decelerated in the last quarter vs 9M (15% vs. 44%), in line with the market (NBH also indicated a slowdown in November -18% y-o-y). Please see the graph on the upper left, below. One might speculate that the slowdown is rather temporary, since a stricter law came into force in Q3 which may have incentivized customers to bring their decision a bit ahead. The truth will be revealed from the next quarter, whether it is a temporary or the overall mortgage lending stepped on the break. We are in a view that was a one-time effect, as banks still expect strong mortgage loan disbursement going forward and Q3 numbers were immensely strong.