89.3 percent – This will be Echa Investment’s stake in the share capital of Archicom after the listed developer brings the housing business to the subsidiary in exchange for its shares. Executor includes housing development projects, staff and land bank amounting to PLN 830 million. In exchange, Archicom will issue more than 22.8 million shares at a price of PLN 36.34 per share. His business, hitherto concentrated in Wroclaw, would expand to Warsaw, Poznań, Kraków and Łódź.
After the announcement, Archicom’s share price rose on Friday from PLN 21.5 at the opening to PLN 23.6 at 11:00.
“Geographical expansion was one of the goals of our business – we started it with the purchase of plots of land in Poznań, Warsaw and Kraków for our future projects. Thanks to the acquisition of the residential business of Echo Investment, we will “turn a higher tack” in development, quickly expand the land bank and structures and increase recognition by being in The most attractive and promising markets are in Poland – says Waldemar Olbrik, President of Archicom.
According to analysts, the formalization of the transfer of the residential business to Archicom is beneficial.
– Managing a housing project as part of two separate entities cooperating with each other and having different shareholders would always raise questions and doubts about whether everyone’s interests are being treated equally. The financial and operational analysis of the housing business was also difficult for outside entities as it was conducted by two separate entities. The consolidation of the whole into a single entity will also allow a clear definition of the strategy in this segment and will enable the realization of cost synergies in terms of human structures – says Mateusz Mucha, real estate analyst.
Cezary Bernatek, Head of Analysis at Erste Securities Polska, expects a positive market reaction when it comes to Archicom share price and a somewhat neutral reaction in the case of Echa Investment shares.
– The issue price of Archicom shares is at PLN 36.3 per share, 69 percent higher than in the previous year. higher than the last closing price. Valuing the regulated part of Echo, which deals with the development of residential projects for sale, at a level of about PLN 829 million in the transaction, means that the price-to-book (price to book) ratio is approximately 3.2x. At first glance, it seems relatively high. For Archicom, at PLN 36.34 per share for the current year, according to our estimates, it is about 1.3 times higher. However, attention should be paid to the relatively low level of equity in the discrete echoing business, and thus the expected high level of return on equity, says Cesare Bernatec.
He also notes that the residential assets transferred to Echo at the end of the first quarter of 2023 were mainly lands with high value-added potential – for example Projekt Mokotów or Stacja Wola. He adds that after the planned release, the Echo will hold an 89.3 percent stake. shares in Archicom, but at the moment it doesn’t seem interested in removing the company from the WSE.
Maciej Drozd, Vice President of Finance for Echa Investment, speaks in this spirit.
– Presence in the financial market allows for transparency, and ensures easy access to debt financing, thanks to which Archicom will remain ready for expansion. The intention of the Echo Investment Group is for Archicom to develop not only organically, but also using the capabilities of the capital market, – says Maciej Drews.