Duna House: loan ranger, with dividends to boot (BUY)

In this report, we update our forecasts for Duna House (DH), a financial intermediary, a real estate broker and a developer. We set our new price target (PT) at HUF 1,189/share, implying 35% upside, and our rating at BUY (vs. no rating or PT previously). DH works with a network of over 4k entrepreneurs in Italy, Poland, Hungary, Poland, and the Czech Republic, across a network of over 240, mostly franchise, offices. Following its 2022 entry into Italy, financial intermediation accounts for around 80-90% of DH’s earnings. Its recent results have been fuelled by the sales of apartments in a residential development in Budapest, which have allowed DH to pay out EUR 25m in dividends over the past 3Y, exceeding our estimate of EUR 22m, and front-loading the payments vs. our original forecast. To put this figure into context, when we initiated coverage of the stock in mid-2022, the shares were trading at a market cap of EUR 46m. We expect the sales of the remaining apartments, as well as a land plot and its HQ office, which it owns, in Budapest, to bring in around a EUR 15m net cash inflow in the next 18M. Additionally, we expect the rate easing ahead to be supportive of the volumes in its core brokerage business. Accordingly, despite the strong performance that the shares have staged since the IPO (a total return of over 300%, or c.20% if annualised, with dividends reinvested), we believe the stock could offer further upside from the current levels.