Dom Development: Turning up the volume (stays BUY)
Following the strong 9M21, we increase our earnings estimates for 2021E and 2022E, and maintain our positive view on the stock. We appreciate that rate hikes and rising construction costs could be a headwind for the sector. That said, tight supply continues to drive price growth, and margins during 4Q21E and FY22E should remain high. We do not see the current peak margin levels as sustainable. Following the entry into Tri-City, Wroclaw and Krakow, however, we believe Dom should be able to increase its mid-cycle level of sales substantially, compared to its former Warsaw-centric model. Higher volumes going forward are the key argument behind our positive view on the stock. We expect to see the ROE close to 30% in both 2021E and 2022E. This means that, despite trading at well over 2x P/BV, we see Dom trading at 9x P/E and 8-9% dividend yields on our 1-2YF figures. We set our new 12M price target at PLN 148 and maintain our BUY on the stock.Dom Development is engaged in the construction and sale of residential real estate in Poland.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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