Arbitration proceedings outcome to burden Q2 results

Consti will report its Q2 results on July 23rd. Profitability figures are expected to be rather grim due to the unfavourable outcome of the arbitration proceedings relating to the Hotel St. George renovation project but apart from that no larger deviations should be expected. The impact of the arbitration proceedings on the operating result should be some EUR 3.0m and we expect an operating result of EUR -0.4m. The impact is partly reflected also in revenue, due to which we expect a slight decline in revenue y/y to EUR 68.5m (Q2/20: EUR 69.3m). Excluding the impact our estimates reflect slight improvement in both revenue and operating result.

Promising start to new construction venture

Apart from the news regarding the arbitration proceedings, the other notable news during the quarter was the announcement of Consti’s first significant new building construction project. The project, consisting of two new office buildings, is valued at approx. EUR 30m. New building construction was implemented as part of Consti’s revised strategy, with the aim for 10-15% of revenue to come from such projects in 2023, and the signing of a deal of such size provides a solid foundation for achieving the target. With Consti having implemented steps to improve profitability, our sights have been turned toward the unfavourable revenue development, and revenue from new construction could well be a driver in Consti’s investment case.

HOLD-rating with a target price of EUR 13.0

We have made no adjustments to our estimates ahead of the Q2 report. We retain our HOLD-rating and target price of EUR 13.0. Our target price values Consti at approx. 16.6x 2021 P/E (excl. arbitration proceedings items).

Evli Research