The Company
- MERKO EHITUS is an Estonian infrastructure and real estate development group operating mainly in Estonia and Lithuania and partially in Norway(until 2026) and Latvia.
- Solid economic growth and population growth could be an advantage for market leader Merko Ehitus.
Catalysts
- Strong corporate growth in the real estate market enables strong and predictable margins.
- 60% of net profit comes from Real Estate Development.
- 50% of net profit is paid out as dividends.
Assumptions
- We expect net profit to increase to 110 million by 2030.
- We expect revenue to rise to 700 million by 2030.
Risks
- Cycles in the construction industry can lead to short-term and long-term low margins and revenue slump if the product portfolio is not particularly diversified.
- Tensions in Eastern Europe caused by the Russian-Ukrainian war could, in the worst case, lead to the destruction of the Baltic states.
- Merko Ehitus is only listed on a few stock exchanges, which makes access difficult despite the listing in England and Germany.
Valuation
- The Merko Group is a solid market leader in the Baltic States and should retain this status in the coming years.
- If we use the average expected cash flow growth per year of 5.72% over the next 5 years we expect a slightly optimistic company value of around 910 million euros.
- Net margins should increase by at least 0.45% annually until 2028.
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Disclaimer
The user IndusyHoldings holds no position in TLSE:MRK1T. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.