First Signs of Reduction in Construction Costs
* 3Q trends still healthy. The company closed 3Q with total revenues up 33.6% YoY to Eu37.4mn, thanks above all to progress on projects under construction and in the process of being finished off, which accounted for Eu31.2mn. EBITDA and EBIT were substantially in line with last year, leading to net profit of Eu3.0mn in the quarter vs Eu3.7mn last year. Net debt was Eu108.8mn, up from Eu92.4mn as at the end of March as a consequence of the increase in NWC due to progress on construction projects close to completion (Milano City Village, Palazzo Naviglio and Trilogy Towers), a trend that will revert once delivery to customers is complete.
* Constructive messages from the release. Among the messages from the results we highlight: 1) the first signs of a reduction in construction costs helped by falling prices for some raw materials and semi-finished products; 2) a development pipeline that remains solid (296,000 commercial sqm on 3,274 standard units); 3) three projects – Milano City Village, Palazzo Naviglio and Trilogy Towers – are at the completion phase, with the presentation of the finished buildings in October 2022 for the first two projects; and 4) at the end of July, the contract for the works on Porta Naviglio Grande was handed to Chianese Group, with work set to start in September.
* Milan residential market still buoyant. The second half of the year confirms the strongly positive trend of the Milanese residential market, as shown by the results of the company’s commercialisation campaigns: thanks to new sales strategies, these campaigns are maximizing market potential, and the trend finds confirmation in sector studies and forecasts that point to a rise in demand and prices. The most recent, the study prepared by Nomisma, predicts a cumulative increase in house purchase prices of 12% between now and 2024. The main reason is demand for housing, which is at an all-time high, with 3.7% of households saying they are house[1]hunting, and an additional 9.6% intending to start looking within a year.
* Estimates substantially confirmed. We broadly confirm our P&L estimates on the expectation that 2022 will be a transitional year for ABT before it starts to reach its full potential from 2023. We expect 2022 to see peak financial demand (albeit amply covered by existing financing) due to the absorption of NWC in order to progress the 3 projects close to completion. In subsequent years there will be a major release of working capital as sale contracts for properties are signed.
* OUTPERFORM confirmed; target kept at Eu8.60. We appreciate AbitareIn, as the company stands out from the crowd thanks to its unique offering and propensity for technological innovation in a sector that typically clings to tradition. We believe the company’s solid pipeline puts it in a good position to take advantage of the development of the residential market in the city of Milan. We confirm our positive recommendation and our Eu8.6 target price.
Intermonte-ABITARE-IN-Company-Research-Report-220908.pdf