Dekpol SA – Two New Projects

It is the subsidiary Dekpol Budownictwo (part of the "General Construction" segment) that has signed an agreement for the construction of a production and warehouse facility with social and office facilities, land development, and technical infrastructure in the Opole Voivodeship. The project amounts to about 8.5% of DEK's turnover for 2022 (1,256 million PLN), that is, 107 million PLN. The goal is to sign the deal during March. The investment is expected to be completed by the end of the first half of 2025. (URL)

On March 12, Dekpol Budownictwo also agreed with a third party on the key terms of a contract. This contract pertains to the performance of construction works as a general contractor, including the building of a warehouse and production hall with social and office spaces as well as accompanying infrastructure in the Pomeranian Voivodeship.

The investment will be implemented in two stages. The first part of the hall is expected to be completed during the third quarter of 2024, while the construction of the second part of the hall is optional, and its completion is to be confirmed by the end of June this year. The value of the fixed remuneration for the implementation of the investment was set at approximately 6% of the sales revenues of the Dekpol Group for 2022, of which the second stage accounts for about 56% of the contract value. This corresponds, for the entire project, to c. 75 million PLN. (URL)

To simplify, assume that half of the revenues from the above projects will be recorded in the accounts for 2024 – that is 91 million PLN. In 2022, the segment generated a turnover of 1 billion PLN – so these projects are good but perhaps not particularly material. Moreover, DEK has a history of releasing a steady stream of press releases about the signing of new projects - so this is nothing out of the ordinary.

It will be interesting to see the recent developments when DEK releases its annual report on April 26 and Q1 on May 27. Stock price-wise, the sector has performed well so far in 2024, but DEK – despite a low relative valuation – has moved in the opposite direction.

Here you can read our analysis from a few weeks back.

EDIT: Per 2024-03-22 DEK announced another LOI-deal regarding construction of a waherhouse building in the north of Poland. Deal-value amounts to 10% of 2022 revenues of the whole group, i.e. c. 145 mpln. The deadline for completing the investment is December 2024 - so if it goes through it will all be in the accounts of this year. By latest on april 5 2024 DEK intends to give the market further information on this topic.

(Disclaimer: at the time of publication, the writer owns shares in the mentioned company)