Original-Research: DEMIRE AG - from NuWays AG
08.11.2024 / 09:07 CET/CEST
Dissemination of a Research, transmitted by EQS News - a service of EQS Group AG.
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Classification of NuWays AG to DEMIRE AG
Company Name: DEMIRE AG
ISIN: DE000A0XFSF0
Reason for the research: Update
Recommendation: Buy
from: 08.11.2024
Target price: EUR 1.50
Target price on sight of: 12 months
Last rating change:
Analyst: Philipp Sennewald
Rental income decreased due to smaller property portfolio, chg.
Q3 rental income declined 20% yoy to EUR 15.2m (eNuW: EUR 16.0m), caused by the lower asset base following larger disposals as well as the deconsolidation of the Limes portfolio in July (eNuW: EUR 8.4m annual rental income). Despite a strong letting performance in the first nine months (+121% yoy) we also saw a decreasing like-for-like contractual rental income (-3.2%), which was mainly case by the increased vacancy rate of 14.7% (vs 13.1% at YE '23) following the insolvency of Mein Real in Querfurt. This was only partly offset by indexation effects concerning existing rental agreements. Yet, we also already saw a sequential improvement in the vacancy rate of 0.8pp in Q3. We regard the strong letting performance as a sign of operational strength as we observe a continuous weakness of the letting markets.
On this basis, we also saw a 12% yoy FFO decrease to EUR 7.5m (eNuW: EUR 7.3m), driven by negative operating leverage which was only slightly offset by an improved rental margin. Yet, an improved FFO margin of 50% shows that DMRE is able to display strong operating performances despite the significantly lowered asset base.
Against this backdrop, management confirmed the FY guidance targeting sales of EUR 64-66m (eNuWnew: EUR 66.1m) as well as a yoy decline in FFO (eNuWnew: EUR 28.4m vs EUR 36.7m in FY '23).
Limes update. Following the insolvency of the Limes subsidiaries, management reiterated during the CC that it expects the assets to remain stable in value (eNuW: EUR 140m with 57% LTV). Hence, there could be upside to our estimates as we conservatively included a total loss for the company in our model.
Disposal engine running. Following two larger disposals in Ulm and Leipzig, management confirmed in the CC that it expects 3 additional smaller deals to be closed until YE '24e as well as several assets do be disposed in FY '25e. Although it is hard to get a grip on the exact volume, management was confident to dispose assets with a volume of up to EUR 50m until YE '25e, which is however below our current estimate of EUR 99m (GAV).
The stock remains undervalued given the significant and, in our view, unjustified NAV discount of 73%. Hence, we reiterate BUY with an unchanged PT of EUR 1.50 based on NAV.
You can download the research here: http://www.more-ir.de/d/31227.pdf For additional information visit our website: www.nuways-ag.com/research
Contact for questions:
NuWays AG - Equity Research
Web: www.nuways-ag.com
Email: research@nuways-ag.com
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