Marvipol Development: BUY Recommendation and FV of PLN 10.49 per Share (31.2% Upside)
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Market recovery as a key driver
We initiate coverage of Marvipol Development with a BUY recommendation and set a FV of PLN 10.49 per share (upside of 31.2%).
We point to the ongoing presales recovery and we predict that the company will pre-sell 495 and 586 units in 2023E and 2024E, respectively, which should support 2025E-26E results (in 2024E, the company will deliver projects with lower profitability, which most likely will negatively affect net profit; we predict a significant improvement in 2025E) and cash flows. We do not underestimate the group’s exposure to stable logistics activity (we do not exclude potential disposals), expected return to dividend payments (we assume DPS of PLN 0.8 in 2024E) and solid balance sheet.
On our forecasts, the company currently trades at P/E ratios of 5.0x in 2023E, 9.6x in 2024E and 5.8x in 2025E, concurrently with a P/BV of 0.5x. Demand recovery and expansion in offer to support pre-sale volumes. After very weak 2022 data (decrease in pre-sales to 207 units, -45% y/y), we anticipate that the company will present a solid rebound, driven by improvement in market circumstances and expected new commencements. Thus, we forecast that 2023E pre-sales will amount to 495 dwellings (+139% y/y; +130% y/y in 1H23) and will continue the trend in 2024E, with a hike of a further 18% y/y. Poor 2024E results and a rebound in 2025E.
As of now, we predict that the company will reach a net profit of PLN 67m in 2023E. We presume that the developer will report rather uninspiring numbers in 2024E, driven by a less favourable delivery mix (lower margins), and we expect a deterioration in profit to PLN 35m. We believe, that profitability and volumes will improve in 2025E and we arrive at a net profit of PLN 57m. Possible divestments in logistics division to boost cash position. The group intends to dispose of at least part of its logistics portfolio, which in turn would support its cash position. We assume that the total value of the three existing projects, dedicated to Marvipol Development, may reach ca. PLN 189m.
We would expect potential transactions in 4Q23E and 2024E as the investment market should gradually rebound. Expected return to recurrent dividend pay-outs. In our forecasts, we assume that the company will return to regular dividend payments, starting from 2024E. We assume a dividend payout ratio of 50% and DPS of PLN 0.8 in 2024E, which implies a DY of 10.0%. Multiple valuation. On our forecasts, Marvipol Development currently trades at a P/E of 5.0x in 2023E and 9.6x in 2024E. As to P/BV multiples, we arrive at 0.5x in 2023E and 2024E, which implies a 70% discount vs. peers.
