EUR 150.00 For Business Accounts Only

Dimand | Waiting game

Delays in project monetization weighing on the shares – Dimand’s share performance remains subdued in 2024, with the stock enjoying just a temporary respite during Aug-Sep. The shares have come under renewed pressure since early November, surrendering all the gains registered during Q2’24. Weighing on the stock, in our view, has been the timeline slippage regarding the monetization of assets (e.g. Minion), fact that has pushed back the key catalyst for re-rating. H1’24 results were in general healthy, with profit before tax increasing 57% yoy (c€5.7m higher) to €15.9m, thus leading to a notable €16m NAV accretion in H1’24 (to €156.2m, +12% compared to end 2023).

… but thesis intact – Although fair value gains in 2024 look set to be lower than we had initially envisaged, given the slower construction progress of Fix, Balkan and IQ Athens, as well as the delayed exit from Minion, this is more of a phasing rather than a fundamental issue. The thesis thus remains intact and is predicated on value creation stemming from asset monetization and capital recycling via the selling of Dimand’s participation in the SPVs developing the properties. With 16 projects poised to be completed over 2024-27e, asset turnover is set to increase markedly in the coming years helping the group bolster its balance sheet, monetize the capital invested and increase ROE. With most of Dimand’s landbank being situated in areas with healthy property demand/supply balance, there is reasonable degree of visibility regarding this monetization scope, in our view. We model a total c€180m profit crystallized from the 16 projects in progress through to 2027e, of which some €16m in 2024e (down from €30m seen before).

How to value Dimand – Valuing Dimand is a rather herculean task due to the complexities associated with the group’s structure and the nature of the development business itself. Our approach is quite simple, namely we value Dimand’s stake in: 1) projects in progress, 2) projects recently announced; and 3) project Skyline (deal to be sealed in the coming months), while also adding the value of: 4) the project mgt services business, which is “asset-light” and can be considered a recurring income stream. We are not keen to assign a perpetual value for Dimand at this stage, since our PT is on a 12m basis and, at the current juncture, we believe that any growth potential for the company beyond its current and in-progress land bank scale would be hard to be priced-in. We come up with a €11.0 SOTP-based PT, arguing the current price effectively incorporates solely the well telegraphed 20 projects and the value of the services business. On the other hand, the upside from project Skyline and the recently announced projects is effectively offered as free option.

Recalibrating estimates to reflect project exit phasing; PT unchanged at €11 – We fine tune our forecasts for the delayed exit from Minion while also assuming a bit higher construction costs for IQ Athens. On the other hand, we have lifted our estimates for project mgt activities to reflect the income generated from contracts for the sale of ready-to-use buildings. We end with an unchanged PT of €11. We remind that global developers with 2-digit ROEs normally trade at or above 1x P/NAV. With Dimand at 1.1x 2023 P/NAV but at