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:

34.53

Commercial real estate company

EUR 31.90

FFO-Yield 23e:

29.52

Balance Sheet Score:

3.8

focused on retail parks in Northern

Market Liquidity Score:

0.0

and Eastern Germany

Market Snapshot:

EUR m

Shareholders:

Key Figures (WRe):

2021e

Price

EUR 28.00

Market cap:

123.76

Freefloat

65.0 %

LTV:

58.1 %

No. of shares (m):

4.42

MSC Invest GmbH

29.0 %

Equity Ratio:

17.8 %

Upside

13.9 %

Freefloat MC:

80.44

Geminus GmbH

4.0 %

Supervisory board

2.0 %

Ø Trad. Vol. (30d):

51.01 th

2021 guidance fulfilled; Growth expected to continue in 2022

Stated Figures Q4/2021:

Comment on Figures:

Preliminary figures show that DEFAMA has met its 2021 guidance with

in EUR m

2021

2021e

2020

+/- in %

an FFO figure of EUR 7.1m and net profit of EUR 5m.

Even though the doubling of net profit and EPS includes a positive one-

Revenues

17,0

17,77

14,58

17%

off impact of EUR ~2m (net) from the property sale in Bleicherode, the

Net profit

5,0

5,13

2,51

101%

adjusted growth of nearly 20% was impressive. The FFO also improved

by 20% while the FFO margin of 42% (WRe) showed a slight increase.

EPS (€)

1,14

1,16

0,57

101%

Our estimates were slightly higher due to temporary differences in the

revenue contributions of acquisitions and properties undergoing

FFO

7,1

7,25

5,87

20%

refurbishment.

2021 FFO yield stands at 5.6% and at 6.7% on achieved annualized

FFO-margin

42%

41%

40%

FFO of EUR 8.5m which provides a good base to reach the FY 22 target

FFOPS (€)

1,60

1,64

1,33

20%

of EUR 8.5m.

DPS

0,51

0,55

0,48

6%

The dividend proposal leads to a current dividend yield of nearly 2%.

  • DEFAMA's 2022 guidance for FFO of EUR 8.5m (WRe: EUR 8.41m) and net profit of EUR 3.5m (WRe: EUR 3.56m) is in line with our expectations. The targeted annualised FFO of EUR 10m at year-end 2022 is ambitious but achievable given the expected contribution from the company's own investments in the portfolio (2022 ~EUR 4m) and new acquisitions (target >previous level of 15-20m; 2021: EUR 29.7m). The FFO guidance might be affected by the possibility of attractive disposals (at higher multiples) which would strengthen the cash position and enable a higher gross acquisition volume.
  • Against the background of a potentially higher acquisition volume and ongoing attractive investments in the existing portfolio, management is considering a small capital increase of 5-10% in the event of successful negotiations with sellers (acquisitions) and tenants (rental contracts). Considering the following possible positive effects from these investments, no dilution effect should be expected after the achievement of full positive effects.

Guidance

2021

WRe 2021

Guidance 2022

2022

WRe 2022

FFO

7,1

7,25

FFO

8,5

8,41

FFOPS

1,60

1,64

FFOPS

1,92

1,90

Net profit (HGB)

>5

5,13

Net profit (HGB)

3,5

3,56

EPS

>1.13

1,16

Annualised FFO

10,0

Current figure 8,5

  • We confirm our Buy recommendation with an unchanged price target of EUR 31.90 as we see ongoing improvements for the FFO and the possibility of attractive disposals after quality improvements in DEFAMA's properties.

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

0.46

0.51

0.57

1.16

0.81

0.96

0.38

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 %

2.0 %

2.1 %

2.3 %

Book Value / Share

3.18

4.10

5.50

5.61

6.22

6.43

6.74

Rel. Performance vs CDAX:

1 month:

6.9 %

P / E

23.2 x

25.0 x

30.1 x

30.9 x

24.1 x

34.8 x

29.0 x

6 months:

29.2 %

Price / Book

2.8 x

2.6 x

2.5 x

3.1 x

4.5 x

4.4 x

4.2 x

P / NAVPS

1.1 x

1.2 x

1.3 x

1.2 x

1.6 x

1.5 x

1.4 x

Year to date:

10.0 %

FFO I-Yield

8.2 %

8.7 %

7.5 %

7.6 %

5.9 %

6.8 %

7.9 %

Trailing 12 months:

45.8 %

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:

2022e: FFO of EUR ~8.5m, Net profit (HGB) of EUR ~3.5m

Analyst

Andreas Pläsier

COM M ENT

Published 01.03.2022 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 01.03.2022

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

24.1 x

34.8 x

29.0 x

P / NAVPS

1.1 x

1.2 x

1.3 x

1.2 x

1.6 x

1.5 x

1.4 x

Price / Book

2.8 x

2.6 x

2.5 x

3.1 x

4.5 x

4.4 x

4.2 x

P / FFOPS I

12.2 x

11.5 x

13.4 x

13.2 x

17.1 x

14.7 x

12.6 x

FFO I-Yield

8.2 %

8.7 %

7.5 %

7.6 %

5.9 %

6.8 %

7.9 %

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 01.03.2022

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: 2022e: FFO of EUR ~8.5m, Net profit (HGB) of EUR ~3.5m

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 01.03.2022

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 01.03.2022

5

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Disclaimer

Defama Deutsche Fachmarkt AG published this content on 01 March 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 01 March 2022 09:07:05 UTC.