Duna House: broking loans and selling sunsets (initiation of coverage)
We initiate sponsored research coverage of Duna House (DH), a financial intermediary, a real estate broker and a developer. DH works with a network of c.5k entrepreneurs in Italy, Poland, Hungary and the Czech Republic, across a network of 280, mostly franchise, offices. Following its recent entry into Italy, financial intermediation accounts for around 70% of DH’s earnings. The planned sale of a small portfolio of standing apartments and the completion of a residential development project in Budapest under way currently could result in a net cash inflow of around EUR 17-18m, or c.40% of DH’s market cap, within the next 2Y, on our estimates. The proceeds could be either distributed as a special dividend (a yield of 20-30% in that case, we estimate), or used to fund entry into a new market through M&A. Rising interest rates and slowing economic growth are likely to result in a steep drop in mortgage origination volumes and fewer real estate transactions, in Poland above all, in our view. This is a headwind for the earnings, which could be amplified by the operating leverage. That said, the entry into Italy and the continued growth of its market share in Poland could offset the pressure. Entry into a new market, or earnings growth in Italy could offer upside to our forecasts. We estimate the fair valuation range at HUF 476-650/share vs. its current share price of HUF 526.
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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