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Helma Eigenheimbau

High-margin projects starting to pay off

Update | General Industrials | 29 Aug 2018

Helma’s decision to maximise margins at the expense of top-line growth amid the present market constraints seems to be bearing fruit, as illustrated by the solid earnings momentum in H118. Residential demand in Germany remains buoyant against the backdrop of a structural housing shortage. In the longer term, Helma’s robust land bank (representing a revenue potential of c EUR 1.2bn according to management) should allow the company to benefit from these fundamentals. Helma’s shares trade at a P/E ratio for FY19e of 8.7x, which is a 17% discount to peer average.

Helma Eigenheimbau

Increased focus on securing high margins

Update | General Industrials | 27 Mar 2018

Helma’s FY17 results exhibit moderate growth (sales up 1.4% y-o-y) due to constrained capacity in the German construction market. However, demand remains strong for residential properties so the company is focusing on maximising margins and gradually utilising its extensive land bank. Management’s new guidance for FY18 is for pre-tax profit of EUR 21.0-22.5m, which implies a 10-18% y-o-y increase. Given the limited visibility for top-line growth, some margin expansion versus FY17 may be required (which we explore in this note). Helma’s shares currently trade at a P/E ratio for FY18e of 10.0x, which is an 8% premium to the peer average.

Helma Eigenheimbau

Market bottlenecks limiting momentum

Update | General Industrials | 14 Sep 2017

Helma’s H117 results confirmed the anticipated slowdown in the German residential market associated with longer project turnaround time in the construction planning and contracting stages. The company’s order intake showed some signs of moderation as it declined 3.6% y-o-y to EUR 116.3m due to the already expected weaker order inflow in HELMA Wohnungsbau. However, management reiterated its recent guidance and forecasts a considerably higher order intake in H217 compared with H117. Helma’s current premium to peers of c 15% on FY17e P/E reverses to a 5% discount in FY18e based on consensus expectations of 27% EPS growth.

Helma Eigenheimbau

Ready to drive home value

Initiation | General Industrials | 12 May 2017

Helma Eigenheimbau provides an opportunity to gain entry into a growth company in a positive phase for the sector, at a time when home ownership is getting government encouragement. Federal government is responding to a recent decline in home ownership to 51.9%, versus 53.4% five years ago, by providing incentives, which along with low interest rates and population growth provides a favourable backdrop. The shares declined a little further after the results for 2016 were released in early March and have fluctuated between €38 and €40 since then. They are still below the 12-month peak levels but up 4x from the 2012 low point. The company issued guidance recently (23 February 2017) that lowered the expected rate of growth in 2017-18 to around 10% pa for revenue and earnings; the share price reaction was overly harsh, in our view.