Echo Investment: Turn on, Tune in, Hold on (downgraded to HOLD)

After a difficult 2018, Echo has experienced a fantastic run in the year to-date. Floating on waves of positivity, the stock is up nearly 40% from the late-December lows, and 20% above the placement in autumn 2017 (on a total return basis). Thanks to its internal development team and the resources to undertake large, multi-use projects, Echo should be able to generate better margins than most of its peers, in our view. The apartment prices in Poland, while on the up, are still significantly cheaper, relative to wages, than 10 years ago. The leasing demand for offices is strong. Investment volumes are at record highs. With some fantastic projects in its portfolio, we maintain our view that Echo remains one of the most attractive stories in our universe over a three-to-five year horizon. That said, with the share price now trading at a c.20% premium to book value, we believe that, in the near term, further upside may be limited. We also note that, with revaluation gains being a significant item in its P&L, earnings could be quite volatile if the transaction market softens. As such, we have downgraded our recommendation to HOLD (from Buy), while we have adjusted our 12M price target (PT) to PLN 4.8/share.