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LHV Baltic Insight: Q2 results for Tallink (TAL1T ET), Merko Ehitus (MRK1T ET), Nordecon (NCN1T ET) and Arco Vara (ARC1T ET)

​* Given the company’s traffic statistics published throughout the quarter and other developments, including the rerouting of several ships in December last year, last quarter Tallink (TAL1T ET) generated both strong revenues and operating profits. Largely driven by a 6.8% y-o-y rise in the total number of passengers and an 8.8% y-o-y improvement in cargo volumes, the company managed to expand its revenues 6.0% y-o-y in Q2 2017 to EUR 259.9m, nicely in line with our expectations (EUR 260.1m). Please also refer to the table in the attachment.

* Although Merko Ehitus’ (MRK1T ET) Q2 2017 revenues fell short of expectations, we are glad that the company’s operating margins were quite close to those targeted. This indicates that Merko has been able to maintain its relatively strong core efficiency, despite upside pressure on costs. On the other hand, Nordecon (NCN1T ET) posted Q2 2017 revenues of EUR 61.9m, up 34.3% y-o-y, and nearly EUR 8m ahead of our expectations. Despite rapidly expanded revenues, the company is facing a serious margin squeeze. We are clearly not pleased with recent developments in the company’s operating profitability, so we plan to revisit our medium-term outlook. Thus, at this point, we have placed our fair value range for the stock under review. Please also refer to the tables in the attachment.

* With no new developments completed in Q2 2017 and an unforeseeable delay in the construction of the Kodulahe project, Arco Vara’s (ARC1T ET) revenues for the quarter rested on the shoulders of the brokerage, valuation and rental of properties. The result was revenues of merely EUR 1.0m, c.a. EUR 0.6m short of our forecast. However, at last there is a sign of better results to come – the company stated that during Q3 2017, it has already begun the transfer and final sales of the Kodulahe Phase 1 apartments, meaning that the second half of the year is likely to end on a strong note with revenues and profits. Please also refer to the table in the attachment.