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Original-Research: DEMIRE AG - from NuWays AG
11.10.2024 / 09:01 CET/CEST
Dissemination of a Research, transmitted by EQS News - a service of EQS
Group AG.
The issuer is solely responsible for the content of this research. The
result of this research does not constitute investment advice or an
invitation to conclude certain stock exchange transactions.
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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: 11.10.2024
Target price: EUR 1.50
Target price on sight of: 12 months
Last rating change:
Analyst: Philipp Sennewald
A stock to BUY after successful refinancing
Topic: DEMIRE released its FY '23 as well as Q1 and Q2 '24 reports. While
the FY '23 figures were exactly in line with the prelims published in April
(click here for detail), the figures for Q1 and Q2 reflect the reduced
portfolio following the disposals of several properties. The clear highlight
however is, that DEMIRE recently reached approval for the prolongation of
its corporate bond, which would have expired in 10/24. Against this
backdrop, the current valuation gap no longer appears justified, which is
why we upgrade the stock to BUY. In detail:
H1 '24 rental income declined 13.1% yoy to EUR 35.5m (eNuW: EUR 32.9m). The
decline was driven by several property disposals, mainly in Ulm and Leipzig
(LogPark, closed in Q1), as well as a higher vacancy rate of 15.5% (vs 9.6%
at H1 '23), which was only partly offset by index related rent increases. In
fact, the annualized contractual rents decreased to EUR 66.9m, down from EUR
85.1m at FY '22. Profit from rental activities in H1 amounted to EUR 23.5m,
also driven by the disposals but as well negatively affected by higher
management expenses and impairments on receivables.
Based on this, FFO in H1 also came in softer at EUR 15.5m (eNuW: EUR 14.9m),
down 19.7% yoy. Diluted FFO per share amounted to EUR 0.15, which compares to
EUR 0.18 in the same period of the previous year.
Against this backdrop, management is guiding for rental income of EUR 64-66m
as well as a significantly lower FFO compared to FY '23 (EUR 36.7m). The
guidance is based on the current annualized contractual rent as well as
further opportunistic disposals of smaller non-strategic and mature assets.
Limes insolvency. In July, DEMIRE announced that it has not reached an
agreemend with DZ HYP regarding the EUR 82m refinancing of the so called Limes
portfolio, which resulted in an insolvency application for the four property
companies affected. According to our estimates, the Limes porfolio has a
remaining BV of EUR 140 and a 6% rental yield (eNuW: EUR 8.4m rental income).
The conclusion of the insolvency process is planned for the coming weeks.
Until then, we conservatively estimate a total loss for the company,
resulting in a valuation loss of EUR 58m, thus leaving some upside to our
estimates.
Most importantly however, DEMIRE finally reached formal approval for the
prolongation of the EUR 499m corporate bond until FY '27e.The process is to be
completed and the structure to be implemented in the coming weeks. In
addition to the initial agreement with a smaller group of bondholders (click
here for update), there have been only
minor changes to the final agreement:
* PIK interest, starting on 1st January 2027, was increased from 1% to 3%
* Further 2% penalty to be paid at maturity if bond volume has not been
reduced by another EUR 50m until YE '26e
Moreover, it was decided to implement a double LuxCo structure as a single
point of enforcement, to provide
greater protection and ease of execution for the bondholders.
In order to perform the communicated EUR 49.9m redemption at par, the tender
offer (max. price of 76.25%, for which DEMIRE received backstop agreements
totaling EUR 194m), as well as the EUR 50m reductions in FY '25e and FY '26e,
the company will not only receive a shareholder loan from Apollo for up to EUR
100m, but also sell further assets going forward.
In fact, the company presented a disposal program with their Market Update
Presentation in June, including
assets worth EUR 297m. Yet, this did also include the LogPark, which was sold
at BV for about EUR 103m in Q1. Hence, the company's remaining disposal
pipeline should amount to c. EUR 194m and is planned to be executed by FY
'26e. Assuming an LTV of 20% and a 10% average discount to BV, this will
result in net proceeds of EUR 140m. Along with the current cash pile of EUR
167m, the Apollo loan as well as the cash flows from operations, this should
enable the company to reduce the outstanding amount of the bond to c. EUR 100m
by FY '26e (eNuW).
While this will certainly burden the company's operating performance over
the coming 3 years (eNuW: rental income -33% until FY '26e), the focus
should be on the positive news, as the going concern is no longer at risk,
in our view. More so, it gives the company a stable basis to focus on its
operating success and the strategic alignment of the portfolio.
This alo gives us the opportunity to reevaluate the case. Even with
declining rental income and FFO, the company's NAV is seen to remain stable,
or even slightly increase going forward given the operating profitability of
DEMIRE. Looking at the current NAV discount of 65%, we observe a significant
valuation gap compared to the peer group (LEG, VNA, AT1, GCP, TEG, HABA),
which stands at a discount of only 34%.
Amid the absence of the refinancing risk, we hence upgrade the stock to BUY
with a new PT of EUR 1.50 (old: EUR 1.20) based on a 40% discount to our NAV FY
'24e.
You can download the research here: http://www.more-ir.de/d/31035.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
LinkedIn: https://www.linkedin.com/company/nuwaysag
Adresse: Mittelweg 16-17, 20148 Hamburg, Germany
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Diese Meldung ist keine Anlageberatung oder Aufforderung zum Abschluss
bestimmter Börsengeschäfte.
Offenlegung möglicher Interessenskonflikte nach § 85 WpHG beim oben
analysierten Unternehmen befinden sich in der vollständigen Analyse.
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2006469 11.10.2024 CET/CEST
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