WOOD Flash - Dom Development: 3Q18 - results in line; doing well operationally; shares look cheap

Dom Development’s 3Q18 results were, by and large, in line with both our estimates and consensus. A degree of uncertainty exists with regards to the 4Q18E net profit (and, consequently, the dividend from the 2018 profit), as some handovers scheduled for December may slip into 2019E. That said, we believe the company continues to do very well operationally. Despite the challenging construction market, the vast majority of Dom’s projects are being delivered on-time, with only three that are scheduled to be delivered in 4Q18E, being delayed, and none by more than a month. At the same time, handovers at three other projects are now expected to commence one month earlier than originally expected.
While the 2018 results are difficult to predict before we know how many units Dom delivered in December, the company seems to be trading at its cheapest levels for five years. With nearly PLN 1.8bn of net sales to be recognised in the P&L, we expect both 2019E and 2020E to be similarly strong. We cannot rule out that the share price will remain under pressure in the near term, along with the rest of the Polish small and mid-cap universe. That said, as Dom’s shares have lost some 24% since we initiated with a HOLD in March this year, we believe the stock offers attractive value for long-term investors. Our 12M PT of PLN 88/share offers some 30% upside from current levels.