Optimism springs anew

Stock market report
The vaccination programme has also injected a welcome dose of optimism into the global stock exchanges. All the signs are that in the second quarter the western world is going to finally emerge from lockdown (at least for the time being) and economies will start making up for the losses of the last twelve months. The results publication season has also started and has revealed that for constructors the situation is at least fine and that the good times for developers should continue throughout this year

The vast sums of money sloshing around capital markets have been having an effect. According to the Bank of America’s calculations, investment funds have raised USD 576 bln, more than in 2009 and 2020. The mood of optimism on the bourses is not only due to the low interest rates but also and above all to the vaccination programmes. In large part due to them, the world is now expecting a rapid bounce-back. The economic forecasts are being revised dramatically upwards, especially for those countries with the most advanced vaccination programmes such as the UK, where expected the expected growth is higher than it has been in the 80 years since the Second World War. In the US the stock markets are being fuelled by the huge public aid package (each citizen is to receive a cheque for USD 1,400) and some of this is certain to turn up on the capital markets. It’s therefore no strange thing that stock market records there are being broken – over the last year, the S&P 500 index has risen by 50 pct, while the profits of listed companies have on average risen by more than 20 pct. In comparison, the Warsaw Stock Exchange doesn’t look quite so buoyant, but in recent years the indexes have not been so keen to follow the more advanced markets, particularly when they’ve been growing. The minimal shifts in the main indexes, however, haven’t held down those for the property and construction sectors, which have recently risen by 4 pct and 2 pct respectively and since the beginning of the year by 11 pct and 17 pct. The situation, particularly for developers, remains very promising. You only need to look at the official industry data to see this: construction work was begun in March on 18,000 apartments, the highest ever monthly figure and a 60 pct rise on March 2020. Even when you take into account that the first full lockdown began in March 2020, this year’s figures are still impressive. It’s a similar story when it comes to the granting of building permits – this time the figures were up by 68 pct. In Q1, construction work began on a total of 40,000 apartments, up by 26 pct on the previous year, while officials gave the go-ahead to 51,500 projects – a 53 pct y-o-y increase. Even though individual investors are becoming more active, the data also show that this is the case for the large residential developers. Those on the stock market have revealed that they sold 7,300 apartments in Q1, up by 20 pct on the previous year. The demand is huge and includes both those who are paying in cash as a protection against inflation as well as those who are buying on credit. For Dom Development, which has turned posting good results into something of a tradition, 2021 should be as good as last year for the entire group when it comes to the number of apartments sold (3,800), even though prices are now higher. The group continues to expand and is about to take over Kraków-based developer Sento. Wikana, which over the last twelve months has seen an impressive rise in its share price, has reported an increase in its net profit, even though its revenues have fallen. In the first quarter it handed over a total of 151 apartments, 61 pct more than last year. The company has a large land bank in several Polish towns and is ready to embark on a growth spurt. Develia, which saw its commercial operations hurt by the pandemic, also enjoyed a double-digit improvement in sales.

Construction firms aren’t doing too badly either, as can be seen from their results for 2020 and their expectations for the first quarter. Unibep posted a figure of PLN 37.2 mln, 29 pct higher than in Q1 2020. Additionally, the company has announced that it will be divvying up its profits with its shareholders. The company has reported higher profits from its contracts and rising revenues in its core business lines – building construction and civil construction – as well as from module construction, although it is still considering its strategic options for this business line. The development segment, in line with the entire apartment construction market, has also registered growth. Even Erbud saw a large 44 pct rise in its net profit to PLN 50.5 mln. A large part of this was attributable to its subsidiary Onde, which invests in alternative sources of energy, including wind and solar farms. Its revenues have risen by over 50 pct to PLN 600 mln. Onde now accounts for over 40 pct of Erbud’s entire order book, while the company’s management claims that the potential for further growth is still substantial because the market is developing rapidly. Mirbud’s share price also warrants attention, as it has risen to its highest ever level as its share price grew by over 200 pct. The company has an order book worth more than PLN 5 bln and is still not slowing down when it comes to bidding in both public and private tenders, including those for road projects. Its development section is also doing well. JHM Development saw its sales rise in the first quarter by 51 pct y-o-y. The big HR news over the last few weeks has been the resignation of Budimex CEO Dariusz Blocher after ten years in the job and almost 20 years in the group’s management. He leaves the company in great shape. According to preliminary data, it earned PLN 71 mln in Q1 (three times more than a year ago) and is continuing to secure new contracts.

One WIG to rule them all

Across the region’s stock exchanges, the WIG 20 enjoyed the highest figures over the previous month, gaining more than 5 pct (over the slightly longer period than usual covered in this article). In Budapest, the BUX fell by almost 2 pct over the previous month, while the PX50 in Prague rose by over 5 pct.