Helma Eigenheimbau - Increased focus on securing high margins

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 €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.