DEFAMA Deutsche Fachmarkt AG

(CDAX, Real Estate, DEF GR)

RESEARCH

Buy

Value Indicators:

EUR

Warburg ESG Risk Score:

2.3

Description:

ESG Score (MSCI based):

3.0

NAV (WRe) 23e:

29.44

Commercial real estate company

EUR 28.60

FFO-Yield 23e:

27.73

Balance Sheet Score:

3.8

focused on retail parks in Northern

(EUR 26.90)

Market Liquidity Score:

0.0

and Eastern Germany

Market Snapshot:

EUR m

Shareholders:

Key Figures (WRe):

2021e

Price

EUR 25.00

Market cap:

110.50

Freefloat

65.0 %

LTV:

58.1 %

No. of shares (m):

4.42

MSC Invest GmbH

29.0 %

Equity Ratio:

17.8 %

Upside

14.4 %

Freefloat MC:

71.83

Geminus GmbH

4.0 %

Supervisory board

2.0 %

Ø Trad. Vol. (30d):

41.69 th

Growth is strong and in line; Rise in underlying acquisition volume possible

Stated Figures Q3/2021:

Comment on Figures:

Strong 9M revenue growth of 23% to EUR 12.62m reflects positive

in EUR m

9M/21

9M/21e

9M/20

+/- in %

portfolio growth and successful optimisation of letting contracts.

Revenues

12,62

12,92

10,28

23%

Significant improvement in

reported

EBITDA of

64% to

EUR

10.7m

EBITDA

10,66

10,79

6,50

64%

(WRe: EUR 10.79m) and in reported

EBT of

83% to EUR

5.52m.

EBIT

7,52

7,62

4,11

83%

Figures include a positive

impact

of

EUR 2.6m from

the sale of

EBT

5,52

5,54

2,51

120%

Bleicherode (EUR 2.2m after tax). Adjusted EBT growth stood at ~16%.

Net profit

4,27

4,24

1,83

133%

Considering that 9M net profit of EUR 4.27m slightly beat our estimates,

EPS (€)

0,97

0,96

0,42

133%

FFO

5,23

5,24

4,22

24%

DEFAMA seems to be well on track to exceed its FY target of EUR 5m.

FFO-margin

41%

41%

41%

Favourable development of FFO & FFOPS which showed an increase of

FFOPS (€)

1,18

1,19

0,96

24%

24% and led to a stable FFO margin of 41%.

LTV (%)

58,0%

61,3%

61,3%

NAV/share (€)

17,76

17,78

15,23

17%

  • 2021 guidance for FFO of >EUR 7.1m (WRe: EUR 7.25m) and net profit of >EUR 5m (WRe: EUR 5.13m) was confirmed and seems to be well within reach. The three acquisitions recently announced will presumably contribute to DEFAMA's figures from January 2022 onwards.
  • The annualised FFO stands at EUR 8.2m and is therefore already ahead of DEFAMA's FY target (EUR 8m). This figure includes several successful redevelopments and letting activities, e.g. in Löwenberg, Büdelsdorf, Hamm and Gardelegen which will not fully contribute with the complete annualised figure in 2022. For this reason, our FFO estimate for 2022 remains nearly unchanged despite the expectation of higher portfolio growth in 2022. The strengthening of DEFAMA's acquisition team offers additional volume growth potential and also the possibility to sell single properties opportunistically for capital recycling.
  • We confirm our Buy recommendation and increase our PT to EUR 28.60 which offers attractive upside for a RE-company of 15%. Higher FV is driven by a rising acquisition volume and a slightly lower FFO-yield requirement of 7.25% in our model (formerly 7.5%) due to an excellent management track-record. Further growth is backed by an attractive acquisition pipeline which could enable a further outperformance of the acquisition volume in 2021 and has already exceeded the upper end of the annual guidance range (EUR 15-20m, 24m ytd).

Changes in Estimates:

Comment on Changes:

+ / -

2022e

+ / -

2023e

+ / - We increase our assumption for expected annual

acquisition volume

FY End: 31.12.

2021e

in EUR m

(old)

(old)

(old)

from

EUR 20m

previously, which is the upper

end of

DEFAMA's

guidance, to EUR 22.5m from 2022 onwards as we are assuming higher

Total revenues

17.77

0.0 %

20.11

0.5 %

22.56

3.0 %

growth momentum due to additional management capacity.

FFO I

7.25

0.0 %

8.36

0.6 %

9.46

4.0 %

FFOPS I

1.64

0.0 %

1.89

0.6 %

2.14

4.0 %

Net income

5.13

0.0 %

3.53

0.9 %

4.05

5.3 %

EPS

1.16

0.0 %

0.80

0.9 %

0.92

5.3 %

FY End: 31.12.

CAGR

in EUR m

(20-23e)

2017

2018

2019

2020

2021e

2022e

2023e

Rental income

5.10

7.61

9.53

12.19

14.93

16.98

19.52

Change yoy

67.9 %

49.2 %

25.1 %

27.9 %

22.5 %

13.7 %

15.0 %

EBIT

2.67

3.59

4.50

5.62

9.28

7.72

8.88

FFO I

2.58

3.65

4.62

5.87

7.25

8.41

9.84

FFO I-margin

50.6 %

47.9 %

48.4 %

48.2 %

48.6 %

49.5 %

50.4 %

EBT

1.77

2.25

2.78

3.49

6.67

4.79

5.69

Net income

1.36

1.68

2.06

2.51

5.13

3.56

4.26

EPS

0.38

0.46

0.51

0.57

1.16

0.81

0.96

FFOPS I

0.73

1.01

1.14

1.33

1.64

1.90

2.23

DPS

0.34

0.40

0.45

0.48

0.55

0.60

0.65

Dividend Yield

3.8 %

3.4 %

2.9 %

2.7 %

2.2 %

2.4 %

2.6 %

Book Value / Share

3.18

4.10

5.50

5.61

6.22

6.43

6.74

Rel. Performance vs CDAX:

1 month:

-1.5 %

P / E

23.2 x

25.0 x

30.1 x

30.9 x

21.5 x

31.0 x

25.9 x

6 months:

24.8 %

Price / Book

2.8 x

2.6 x

2.5 x

3.1 x

4.0 x

3.9 x

3.7 x

P / NAVPS

1.1 x

1.2 x

1.3 x

1.2 x

1.5 x

1.4 x

1.3 x

Year to date:

13.7 %

FFO I-Yield

8.2 %

8.7 %

7.5 %

7.6 %

6.6 %

7.6 %

8.9 %

Trailing 12 months:

-3.4 %

ROE

12.4 %

12.3 %

10.2 %

10.2 %

19.6 %

12.7 %

14.6 %

LTV

61.1 %

62.0 %

58.2 %

60.2 %

58.1 %

59.0 %

59.4 %

Company events:

Guidance:

2021e: FFO of EUR ~7.1m, Net profit (HGB) of EUR >5.0m

Analyst

Andreas Pläsier

COM M ENT

Published 03.11.2021 08:15

1

aplaesier@warburg-research.com

+49 40 309537-246

DEFAMA Deutsche Fachmarkt AG

RESEARCH

EPRA-NAV per share development

FFO per share development

in EUR

in EUR

Source: Warburg Research

Source: Warburg Research

Company Background

  • Founded in 2014 and headquartered in Berlin, DEFAMA focuses on the acquisition, ownership and management of retail parks in German small and medium-sized cities, predominantly in Northern and Eastern Germany.
  • The investment strategy is to "buy and hold" assets with high occupancy and minor capex needs for a purchase price of ~10x annual rent.
  • Investment volumes are EUR 1 - 5 million per asset. Anchor tenants are nationwide retailers.

Competitive Quality

  • Real estate competence: founder, major shareholder and CEO Matthias Schrade, previously oversaw as a board member responsible for acquisitions for a non-listed real estate company based in Munich.
  • Unique focus: the company competes for assets that are too large for individual investors and too small for institutional investors and can "buy low".
  • Strong access to local public banks networks, for whom real estate financings for DEFAMA projects are large and important deals. They in turn know smaller tenants well.
  • Focus on leading centers in smaller cities ("big fish in a small pond").

Geographical breakdown of rental

Rental income by sector

income

% of rental income

% of total rental income

Source: Warburg Research

COM M ENT

Published 03.11.2021

2

DEFAMA Deutsche Fachmarkt AG

RESEARCH

Valuation

2017

2018

2019

2020

2021e

2022e

2023e

P / E

23.2 x

25.0 x

30.1 x

30.9 x

21.5 x

31.0 x

25.9 x

P / NAVPS

1.1 x

1.2 x

1.3 x

1.2 x

1.5 x

1.4 x

1.3 x

Price / Book

2.8 x

2.6 x

2.5 x

3.1 x

4.0 x

3.9 x

3.7 x

P / FFOPS I

12.2 x

11.5 x

13.4 x

13.2 x

15.2 x

13.1 x

11.2 x

FFO I-Yield

8.2 %

8.7 %

7.5 %

7.6 %

6.6 %

7.6 %

8.9 %

ROE

12.4 %

12.3 %

10.2 %

10.2 %

19.6 %

12.7 %

14.6 %

Equity Ratio

21 %

19 %

24 %

18 %

18 %

17 %

16 %

Company Specific Items

2017

2018

2019

2020

2021e

2022e

2023e

NAV/Share

8.42

11.02

13.46

16.86

18.85

20.22

21.88

Vacancy Rate

2.7 %

4.3 %

4.0 %

3.7 %

3.7 %

4.0 %

4.0 %

COM M ENT

Published 03.11.2021

3

DEFAMA Deutsche Fachmarkt AG

RESEARCH

Consolidated profit and loss

In EUR m

2017

2018

2019

2020

2021e

2022e

2023e

Total revenues

5.83

9.09

11.21

14.58

17.77

20.21

23.24

Rental income

5.10

7.61

9.53

12.19

14.93

16.98

19.52

Change yoy

67.9 %

49.2 %

25.1 %

27.9 %

22.5 %

13.7 %

15.0 %

Property operating costs

1.24

2.21

2.63

3.40

4.21

4.69

5.39

Property management costs

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Rental profit

4.58

6.87

8.57

11.18

13.56

15.52

17.84

Income from property sales

0.00

0.00

0.00

0.00

2.60

0.00

0.00

Other revenues

0.12

0.08

0.07

0.12

0.25

0.24

0.28

Gross profit

4.70

6.95

8.64

11.30

16.41

15.76

18.12

Administration expenses

0.35

0.70

0.70

0.81

1.00

1.13

1.30

Personnel expenses

0.47

0.72

1.04

1.50

1.83

2.06

2.37

Other operating income/expenses

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Unfrequent items

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

EBITDA

3.89

5.53

7.04

8.99

13.58

12.57

14.45

Valuation result

0.00

0.00

0.00

0.00

2.60

0.00

0.00

Depreciation of fixed assets

1.22

1.95

2.55

3.36

4.30

4.85

5.58

EBITA

2.67

3.59

4.50

5.62

9.28

7.72

8.88

Amortisation of intangible assets/Goodwill

0.00

0.00

0.00

0.00

0.00

0.00

0.00

EBIT

2.67

3.59

4.50

5.62

9.28

7.72

8.88

Interest income

0.00

0.00

0.01

0.01

0.00

0.00

0.00

Interest expenses

0.90

1.34

1.73

2.14

2.62

2.93

3.19

Other financial income (loss)

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Financial result

-0.90

-1.34

-1.72

-2.13

-2.62

-2.93

-3.19

EBT

1.77

2.25

2.78

3.49

6.67

4.79

5.69

Margin

30.4 %

24.8 %

24.8 %

24.0 %

37.5 %

23.7 %

24.5 %

Total taxes

-0.41

-0.55

-0.71

-0.71

-0.71

-1.23

-1.42

thereof cash taxes

-0.28

-0.36

-0.42

-0.42

-0.42

-0.73

-0.87

Net income from continuing operations

1.36

1.70

2.07

2.51

5.14

3.56

4.27

Income from discontinued operations (net of tax)

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Net income before minorities

1.36

1.70

2.07

2.51

5.14

3.56

4.27

Minority interest

0.00

0.02

0.01

0.00

0.00

0.00

0.00

Net income

1.36

1.68

2.06

2.51

5.13

3.56

4.26

Number of shares, average

3.55

3.62

4.05

4.42

4.42

4.42

4.42

FFO (II)

2.58

3.65

4.62

5.87

7.25

8.41

9.84

FFO I-margin

50.6 %

47.9 %

48.4 %

48.2 %

48.6 %

49.5 %

50.4 %

FFOPS I

0.73

1.01

1.14

1.33

1.64

1.90

2.23

EPS

0.38

0.46

0.51

0.57

1.16

0.81

0.96

EPS adj.

0.38

0.43

0.47

0.57

1.16

0.81

0.96

*Adjustments made for:

Guidance: 2021e: FFO of EUR ~7.1m, Net profit (HGB) of EUR >5.0m

Financial Ratios

2017

2018

2019

2020

2021e

2022e

2023e

Property operating costs / Rental Income

24.4 %

29.1 %

27.6 %

27.9 %

28.2 %

27.6 %

27.6 %

Operating Leverage (Real Estate)

2.4 x

2.9 x

5.0 x

4.6 x

5.5 x

8.5 x

7.8 x

Rental profit / interest expenses

5.1 x

5.1 x

5.0 x

5.2 x

5.2 x

5.3 x

5.6 x

Revenues, EBITDA

Operating Performance

Performance per Share

in EUR m

in %

Source: Warburg Research

Source:

Source: Warburg Research

COM M ENT

Published 03.11.2021

4

DEFAMA Deutsche Fachmarkt AG

RESEARCH

Consolidated balance sheet

In EUR m

2017

2018

2019

2020

2021e

2022e

2023e

Assets

Goodwill and other intangible assets

0.01

0.01

0.03

0.02

0.02

0.02

0.02

thereof other intangible assets

0.00

0.00

0.00

0.00

0.00

0.00

0.00

thereof Goodwill

0.01

0.01

0.03

0.02

0.02

0.02

0.02

Property, plant and equipment

0.03

0.08

0.11

1.39

1.41

1.42

1.43

Investment properties

51.96

81.10

93.14

127.79

141.83

156.75

170.94

Financial assets

0.24

0.26

1.70

0.12

0.45

0.45

0.45

Other long-term assets

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Fixed assets

52.24

81.44

94.98

129.33

143.71

158.64

172.84

Inventories

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Accounts receivable

0.22

0.51

0.00

0.80

0.91

0.93

0.95

Liquid assets

2.49

2.80

6.98

4.28

11.46

8.12

8.46

Other short-term assets

0.83

0.59

-2.56

-0.66

-7.95

-4.63

-4.99

Current assets

3.17

4.34

9.29

7.38

13.39

10.07

10.44

Total Assets

55.41

85.79

104.28

136.71

157.10

168.70

183.28

Liabilities and shareholders' equity

Subscribed capital

3.55

3.90

4.42

4.42

4.42

4.42

4.42

Capital reserve

6.15

10.03

17.31

17.31

17.31

17.31

17.31

Retained earnings

1.59

2.06

2.56

3.07

5.78

6.68

8.07

Other equity components

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Shareholders' equity

11.29

15.99

24.29

24.81

27.51

28.42

29.80

Minority interest

0.10

0.38

0.39

0.40

0.40

0.40

0.40

Provisions

0.36

1.01

0.43

0.51

0.51

0.51

0.51

thereof provisions for pensions and similar obligations

0.18

0.21

0.21

0.25

0.25

0.25

0.25

Financial liabilities (total)

43.07

67.79

76.52

110.25

127.74

138.35

151.43

Short-term financial liabilities

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Accounts payable

0.19

0.30

0.51

0.29

0.42

0.42

0.42

Other liabilities

0.51

0.70

2.54

0.86

0.92

1.01

1.12

Liabilities

44.13

69.79

79.99

111.91

129.59

140.29

153.48

Total liabilities and shareholders' equity

55.41

85.79

104.28

136.71

157.10

168.70

183.28

Financial Ratios

2017

2018

2019

2020

2021e

2022e

2023e

Return on Capital

ROA

3.1 %

2.4 %

2.2 %

2.1 %

3.5 %

2.2 %

2.4 %

ROE

12.4 %

12.3 %

10.2 %

10.2 %

19.6 %

12.7 %

14.6 %

FFO I / Equity

0.2 x

0.3 x

0.2 x

0.2 x

0.3 x

0.3 x

0.3 x

Solvency

Net Debt

40.76

65.20

69.75

106.23

116.53

130.48

143.23

Net Financial Debt

40.58

64.99

69.54

105.98

116.28

130.23

142.97

Net Fin. Debt / EBITDA

10.4 x

11.7 x

9.9 x

11.8 x

8.6 x

10.4 x

9.9 x

LTV

61.1 %

62.0 %

58.2 %

60.2 %

58.1 %

59.0 %

59.4 %

Equity Ratio

20.5 %

19.1 %

23.7 %

18.4 %

17.8 %

17.1 %

16.5 %

LTV

ROE

Book Value per Share

in %

in EUR

Source: Warburg Research

Source: Warburg Research

Source: Warburg Research

COM M ENT

Published 03.11.2021

5

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Disclaimer

Defama Deutsche Fachmarkt AG published this content on 03 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 November 2021 10:23:07 UTC.