DEFAMA Deutsche Fachmarkt : „A convincing FY 22e outlook“

DEFAMA Deutsche Fachmarkt AG

A convincing FY 22e outlook

We confirm our Buy rating and our PT of EUR 32.50 after the compa­ ny reported record FY 21 prelims and a convincing FY 22e outlook. FY 21 sales increased by 17% yoy to EUR 17.0m (M´e: EUR 17.2m) while the FFO grew by 20% yoy to EUR 7.1m (M´e: EUR 7.3m). The strong FY 22e FFO guidance points to a continuation of the growth story: the FFO should come in at EUR 8.5m in FY 22e, implying FFO growth of almost 20% yoy, and the annualized FFO should amount to EUR 10m at the end of the year (currently ~EUR 8.5m). Portfolio ex­ pansion should remain the key driver behind sustained FFO growth going forward but also investments into the existing portfolio are ex­ pected to be FFO accretive to a smaller extent. In this context, we es­ timate that the annual acquisition volume could come in at least at the high end of DEFAMA´s EUR 15m-20m annual acquisition target in FY 22e and beyond. Considering the expectable strong acquisition dealflow of the company, we also believe that DEFAMA´s FY 25e tar­ gets, namely an FFO of EUR 11m and annualized rents of EUR 24m, appear to be conservative and could be updated in the foreseeable future. In summary, DEFAMA continues to provide investors an at­ tractive growth story (18.4% FFO CAGR 20-23e) in a defensive niche of the German property market and we have an unchanged positive stance on the investment case.

• We increase our FY 22e FFOPS estimate by ~2%, reflecting DEFAMA´s better than expected FY 22e outlook.
• Valuation: DEFAMA trades at a P/FFO 23 multiple of 12.7x, its peers at 14.4x.

(DEF GY) | Real EstateMarch 01, 2022

Buy	unchanged
Price*	EUR 28.00
Price target	EUR 32.50	(unchanged)

• XETRA trading price at the close of the previous day unless stated otherwise in the Disclosures

Market Cap (EUR m)1	124
Enterprise Value (EUR m)1	265
Free Float (%)1	65.0

Price (in EUR)1

Fundamentals (in EUR m)1	2018	2019	2020	2021e	2022e	2023e	Performance (in %)1	1m	3m	12m
Sales	9	11	15	17	20	23	Share	-0.7	8.5	44.3
EBITDA	6	7	9	13	13	14	Rel. to Prime All Share	7.0	16.7	40.9
EPS adj. (EUR)	0.46	0.51	0.57	1.14	0.84	0.94
FFO	3.6	4.6	5.9	7.1	8.5	9.7	Changes in estimates (in %)1	2021e	2022e	2023e
DPS (EUR)	0.40	0.45	0.48	0.51	0.54	0.58	Sales	-1.2	1.0	0.0
Operating Cash Flow (EUR)	3	4	5	7	8	8	EBIT	-2.3	1.8	0.0
Dividend paid (EUR)	1	2	2	2	2	3	EPS	-4.0	2.7	0.0
Capital expenditures (EUR)	31	16	38	30	20	20	Sponsored Research
Ratios1	2018	2019	2020	2021e	2022e	2023e
EV/EBITDA	19.6	19.4	21.5	18.4	21.0	19.6	Author: Stephan Bonhage
PCFR	8.7	10.5	10.9	10.5	10.9	9.6
P/E adj.	25.9	32.5	34.8	24.4	33.2	29.8	Financial Analyst Equities
Dividend yield (%)	3.3	2.7	2.4	1.8	1.9	2.1
EBIT margin (%)	39.5	40.1	38.6	55.4	40.2	39.8	[phone]
Gearing (%)	396.8	281.7	420.5	432.9	430.7	430.5
PBV	2.7	2.8	3.5	4.3	3.8	3.5	[e-mail]

1Sources: Bloomberg, Metzler Research

Information for professional clients and eligible counterparties - not to be passed on to private clients

1

Our investment case in a nutshell

• Focus on a retail property market niche: DEFAMA has become what we would call a relevant player in a niche of the German retail property market. Its prop­ erty portfolio consists of mainly retail parks, usually located in small and medi­ um-sizedcities of Northern and Eastern Germany. New acquisition objects within this fragmented market niche (purchase price per property usually be­ tween EUR 1m to EUR 5m) are too large for private buyers, but at the same time, too small for institutional investors. This allows DEFAMA to purchase at low market prices (~9x annual rental income in the past) and thus achieve double-digitrental yields.
• Growth momentum is driven by property acquisitions: The company has the long-termtarget to become one of the largest owners of retail parks in Ger­ many and pursues a "Buy and Hold" approach for its property portfolio. We believe retail park acquisitions should mainly drive sales and FFO growth in the coming years as DEFAMA intends to purchase new properties for EUR 15m to EUR 20m each year.
• Anchor tenants with non-cyclical business models: Anchor tenants of DEFAMA´s retail parks are leading German food retailers, which account for approx. 50% of the rental income. Their non-cyclicalbusiness models should lower the risk of tenant losses and secure stable income generation for
  DEFAMA, in our opinion. Moreover, food retailers profit from a low online pen­ etration in their sector.

Valuation

Information for professional clients and eligible counterparties - not to be passed on to private clients

2

Key Data

Company profile
CEO: Matthias Schrade	CFO: -	Berlin, Germany

DEFAMA, headquartered in Berlin, is a large German real estate company that specializes in the acquisition and management of retail parks. Acquisition targets are retail parks in small and medium-sized German cities, preferably in Northern and Eastern Germany. As of the 31.12.2021, DEFAMA´s property portfolio com­ prised 50 properties.

Major shareholders

Matthias Schrade (29%), Geminus GmbH (4%), Other management (2%)

Key figures
P&L (in EUR m)	2018	%	2019	%	2020	%	2021e	%	2022e	%	2023e	%
Sales	9	55.9	11	23.3	15	30.1	17	16.6	20	17.6	23	13.0
EBITDA	6	42.3	7	27.3	9	27.6	13	50.2	13	-6.5	14	13.0
EBITDA margin (%)	60.9	-8.7	62.9	3.2	61.7	-1.9	79.4	28.8	63.1	-20.5	63.1	0.0
EBIT	4	34.5	4	25.3	6	25.1	9	67.4	8	-14.6	9	11.9
EBIT margin (%)	39.5	-13.8	40.1	1.6	38.6	-3.8	55.4	43.6	40.2	-27.4	39.8	-1.0
Financial result	-1	-49.0	-2	-28.7	-2	-23.9	-3	-22.1	-3	-17.6	-3	-12.3
EBT	2	27.1	3	23.3	3	25.8	7	95.0	5	-26.9	6	11.6
Taxes	-1	-34.3	-1	-28.7	-1	-38.7	-2	-79.9	-1	29.7	-1	-11.6
Tax rate (%)	-24.5	n.a.	-25.6	n.a.	-28.2	n.a.	-26.0	n.a.	-25.0	n.a.	-25.0	n.a.
Net income	2	25.0	2	21.5	3	21.4	5	101.0	4	-25.9	4	11.6
Minority interests	0	n.m.	0	-48.8	0	-62.9	0	169.7	0	0.0	0	0.0
Net Income after minorities	2	23.4	2	22.5	3	21.9	5	100.9	4	-26.0	4	11.7
Number of shares outstanding (m)	4	2.1	4	11.9	4	9.1	4	0.0	4	0.0	4	0.0
EPS adj. (EUR)	0.46	20.7	0.51	9.5	0.57	11.7	1.14	100.9	0.84	-26.0	0.94	11.7
DPS (EUR)	0.40	17.6	0.45	12.5	0.48	6.7	0.51	6.3	0.54	5.9	0.58	7.4
Dividend yield (%)	3.3	n.a.	2.7	n.a.	2.4	n.a.	1.8	n.a.	1.9	n.a.	2.1	n.a.
Cash Flow (in EUR m)	2018	%	2019	%	2020	%	2021e	%	2022e	%	2023e	%
Operating Cash Flow	3	24.1	4	11.1	5	30.6	7	37.0	8	10.3	8	12.0
Increase in working capital	0	n.a.	0	n.a.	0	n.a.	0	n.a.	0	n.a.	0	n.a.
Capital expenditures	31	42.1	16	-48.4	38	135.7	30	-21.7	20	-32.7	20	0.0
Dividend paid	1	70.0	2	29.4	2	27.5	2	6.7	2	6.3	3	13.7
Free cash flow (post dividend)	-29	-45.6	-14	52.2	-35	-152.3	-25	28.4	-15	41.0	-14	4.0
Balance sheet (in EUR m)	2018	%	2019	%	2020	%	2021e	%	2022e	%	2023e	%
Assets	86	54.8	104	21.6	137	31.1	160	16.8	178	11.4	196	10.1
Goodwill	0	n.a.	0	n.a.	0	n.a.	0	n.a.	0	n.a.	0	n.a.
Shareholders' equity	16	43.9	25	50.7	25	2.1	29	15.5	33	12.4	36	10.1
Net Debt incl. Provisions	65	60.2	70	7.0	106	52.4	126	18.9	141	11.8	155	10.1
Gearing (%)	396.8	n.a.	281.7	n.a.	420.5	n.a.	432.9	n.a.	430.7	n.a.	430.5	n.a.
Net debt/EBITDA	11.7	n.a.	9.9	n.a.	11.8	n.a.	9.3	n.a.	11.2	n.a.	10.9	n.a.

Structure

Tenant strucutre 2020

Sources: Bloomberg, Metzler Research

Information for professional clients and eligible counterparties - not to be passed on to private clients

3

Disclosures

Recommendation history	Recommendations for each financial instrument or issuer - mentioned in this docu­
		ment - published by Metzler in the past twelve months
Date of dissemi­	Metzler recommendation *	Current price **	Price target *	Author ***
nation	Previous	Current
Issuer/Financial Instrument (ISIN): DEFAMA Deutsche Fachmarkt AG (DE000A13SUL5)
21.02.2022	Buy	Buy	27.80 EUR	32.50 EUR	Bonhage, Stephan
03.11.2021	Buy	Buy	25.00 EUR	27.20 EUR	Bonhage, Stephan
11.10.2021	Buy	Buy	24.60 EUR	27.20 EUR	Bonhage, Stephan
29.07.2021	Buy	Buy	22.40 EUR	25.50 EUR	Bonhage, Stephan
19.05.2021	Buy	Buy	20.00 EUR	23.00 EUR	Bonhage, Stephan
30.04.2021	Buy	Buy	19.50 EUR	23.00 EUR	Bonhage, Stephan
01.03.2021	Buy	Buy	19.40 EUR	23.00 EUR	Bonhage, Stephan
Issuer/Financial Instrument (ISIN): Deutsche Konsum REIT-AG (DE000A14KRD3)
15.02.2022	Buy	Buy	13.35 EUR	17.60 EUR	Bonhage, Stephan
20.12.2021	Buy	Buy	14.00 EUR	17.60 EUR	Bonhage, Stephan
09.12.2021	Buy	Buy	14.10 EUR	17.90 EUR	Bonhage, Stephan
04.10.2021	Buy	Buy	14.40 EUR	17.90 EUR	Bonhage, Stephan
13.08.2021	Buy	Buy	14.65 EUR	17.90 EUR	Bonhage, Stephan
18.06.2021	Buy	Buy	15.15 EUR	17.90 EUR	Bonhage, Stephan
17.05.2021	Buy	Buy	15.20 EUR	17.90 EUR	Bonhage, Stephan
19.03.2021	n.a.	Buy	15.55 EUR	17.90 EUR	Bonhage, Stephan

• Effective until the price target and/or investment recommendation is updated (FI/FX recommendations are valid solely at the time of publication)
• XETRA trading price at the close of the previous day unless stated otherwise herein
• All authors are financial analysts

DEFAMA Deutsche Fachmarkt AG

13 . Metzler, a company affiliated with Metzler and/or a person that has worked on compiling this report has reached an agreement with the is­ suer relating to the production of investment recommendations.

Compiled: March 01, 2022 09:28 AM CET

Initial release: March 01, 2022 09:28 AM CET

Information for professional clients and eligible counterparties - not to be passed on to private clients

4

Disclaimer

This document has been prepared by B. Metzler seel. Sohn & Co. AG (Metzler) and is addressed exclusively to eligible counterparties and professional clients. It is thus not suitable for retail clients.

This document is based on information which is generally available and which Metzler believes to be fundamentally reliable. Metzler has not verified the accuracy or com­ pleteness of the information, however, and thus provides no warranty or representation in respect of the accuracy or completeness of the information, opinions, estimates, recommendations and forecasts contained in this document. Neither Metzler nor any of its shareholders or employees are liable for damage or any other disadvantage suf­ fered due to inaccurate or incomplete information, opinions, estimates, recommendations or forecasts as a result of the distribution or use of or in connection to this docu­ ment.

This document does not constitute or form part of any offer to buy or solicitation of any offer to buy securities, other financial instruments or other investment instruments. Neither does it take account of the particular investment objectives, financial situation or needs of individual recipients nor does it constitute personal investment advice. Metzler does not act as investment advisor or portfolio manager in preparing and publishing this document. Recipients must make their own investment decisions in accor­ dance with their specific financial situation and investment objectives, based on independent processes and analyses, taking sales or other prospectuses, information memo­ randa and other investor information into account, and consult with an independent financial advisor where necessary. Recipients should note that any information regarding past performance should not be relied upon as an indication of future performance and should therefore not form the basis of any decision whether or not to invest in any fi­ nancial instruments.

The information, opinions, estimates, recommendations and forecasts contained in this document reflect the personal views of the author at the time of publication on the fi­ nancial instruments or issuers that form the subject of this document and do not necessarily reflect the opinions of Metzler, the issuer or third parties. They may also be sub­ ject to change on account of future events and developments. Metzler has no obligation to amend, supplement or update this document or to otherwise notify recipients in the event that any information, opinions, estimates, recommendations or forecasts stated herein should change or subsequently become inaccurate, incomplete or mislead­ ing. The model calculations contained in this document, if any, are examples showing the possible performance and are based on various assumptions (e.g. regarding earn­ ings and volatility). The actual performance may be higher or lower, depending on market trends and on the correctness of assumptions underlying the model calculations. Accordingly, actual performance cannot be guaranteed, warranted or assured.

Recipients should assume that (a) Metzler is entitled to acquire orders for investment banking, securities or other services from or with companies which form the subject of research publications and that (b) analysts who were involved in preparing research publications may, within the scope of regulatory laws, be indirectly involved in the acqui­ sition of such orders.

Metzler and its employees may hold positions in securities of the companies analysed or in other investment objects or may conduct transactions with such securities or in­ vestment objects.

This document is provided for information purposes only and may not be copied, duplicated, forwarded to third parties or otherwise published, in whole or in part, without Metzler's written consent. Metzler reserves all copyrights and rights of use, including those relating to electronic media. Insofar as Metzler provides hyperlinks to websites of the companies cited in research publications, this does not mean that Metzler confirms, recommends or warrants any data contained on the linked sites or data which can be accessed from such sites. Metzler accepts no liability for links or data, nor for any consequences which may arise as a result of following the links and/or using the data.

This document is subject to the laws of the Federal Republic of Germany. Venue of jurisdiction for any disputes shall be Frankfurt am Main, Germany.

By accepting this document the recipient declares his/her agreement with the above provisions.

Information in accordance with Regulation (EU) No. 596/2014, Delegated Regulation (EU) No. 2016/958 and section 85 (1) of the German Securities Trading Act (Wertpapier­ handelsgesetz)

Persons responsible for this document

The company responsible for preparing this document is B. Metzler seel. Sohn & Co. AG, Untermainanlage 1, 60329 Frankfurt am Main, Germany, which is subject to supervi­ sion by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht; BaFin), Marie-Curie-Straße24-28, 60439 Frankfurt/Main, Ger­ many, and by the European Central Bank (ECB), Sonnemannstraße 20, 60314 Frankfurt/Main, Germany.

Key information sources

The sources of information referred to when preparing research publications include publications by national and international media, the European Central Bank and other public authorities, information services (such as Reuters and Bloomberg), the financial press, published statistics, information published by rating agencies, annual reports and other information provided by the issuers.

Valuation criteria and methods

Valuations are based on standard and acknowledged methods of fundamental and technical analysis (e.g. DCF model, peer-group analysis, sum-of-the-parts model, relative- value analysis). The valuation models are affected by macro-economic values such as interest rates, exchange rates, commodities prices and economic performance, as well as by market sentiments. Detailed information on the valuation principles and methods used by Metzler and the assumptions on which they are based is available at: www.metzler.com/disclaimer-capital-markets-en.

Sensitivity of valuation parameters; risks

The figures on which the company valuations are based are date-specific estimates and thus carry inherent risks. They may be adjusted at any time without prior notice.

Information for professional clients and eligible counterparties - not to be passed on to private clients

5