DEFAMA Deutsche Fachmarkt AG

(CDAX, Real Estate, DEF GR)

RESEARCH

Buy

EUR 32.60

(EUR 31.90)

Price

EUR 24.20

Upside

34.7 %

Value Indicators:

EUR

Warburg ESG Risk Score:

2.3

Description:

ESG Score (MSCI based):

3.0

NAV (WRe) 24e:

36.52

Commercial real estate company

FFO-Yield 24e:

28.78

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

Market cap:

116.16

Freefloat

72.00 %

LTV:

61.3 %

No. of shares (m):

4.80

MSC Invest GmbH

26.00 %

Equity Ratio:

18.0 %

EV:

245.27

Supervisory board

2.00 %

Freefloat MC:

83.64

Ø Trad. Vol. (30d):

40.36 th

Good start to 2022 and promising outlook following attractive acquisitions

Stated Figures Q1/2022:

Comment on Figures:

DEFAMA

released sound Q1 figures

recently,

which

showed

strong

in EUR m

Q1/22

Q1/22e

Q1/21

+/- in %

growth of 15% on the top line and for FFO.

Revenues

4,64

4,69

4,05

15%

Revenue

growth to EUR 4.64m

was

mainly

driven

by DEFAMA's

successful

acquisition activities

and

also included

some

lower

EBITDA

2,91

2,87

2,56

14%

contributions owing to redevelopment in Hamm and Rendsburg.

EBIT

1,72

1,70

1,57

10%

Adjusted FFO growth of 19% was somewhat higher, adjusted for one-off

EBT

1,04

1,05

0,95

9%

effects (costs of capital increase & revenue from prolongation).

Net profit

0,77

0,82

0,70

10%

As expected, the company confirmed the 2022 guidance for FFO of EUR

EPS (€)

0,17

0,19

0,16

7%

8.5m and

net profit (German GAAP) of EUR 3.5m. The current

FFO

1,95

1,96

1,69

15%

annualized FFO is expected to grow to EUR 10m which should be partly

FFO-margin

42%

42%

42%

achieved by further acquisitions but also with letting activities (e.g.

FFOPS (€)

0,44

0,44

0,38

15%

Gardelegen).

  • DEFAMA's successful acquisitions will enable additional growth in the next quarters. In Q2, DEFAMA will benefit from acquired properties in Bergkamen, Wolfsburg-Nordsteimke and Köln-Rondorf which will contribute an additional ~EUR 180k in Q2. Furthermore, successful letting activities partly after some redevelopment as well as positive effects from the indexation of rental contracts will be supportive for DEFAMA's top-line development in 2022 and 2023.
  • We confirm our Buy recommendation as DEFAMA's strong track record of acquisitions has continued with the last EUR 15m transaction since its capital increase in March. The pipeline remains promising and higher interest rates might offer some buying opportunities in the market, especially in light of DEFAMA's strong network. Our slightly increased price target of EUR 32.60 is based on our estimates for 2024 and fair values from rent multiple (14.5) and FFO yield (7%). It also considers the standardized increase in the risk-free rate in our models. The possible valuation risk for the NAV from property in Lübbenau due to necessary capex for the fire-prevention measures that were lacking after purchase in 2018 was already included in DEFAMA's published NAVPS.

Changes in Estimates:

Comment on Changes:

+ / -

2023e

+ / -

2024e

+ / - We slightly adjust our numbers for 2022 and 2023 to reflect a) expected

FY End: 31.12.

2022e

in EUR m

(old)

(old)

(old)

acquisition effects, b) mentioned one-off costs

and c) impact from

redevelopment within the portfolio.

FFO I

8.37

0.6 %

9.85

2.4 %

n.a.

n.m.

We have not included any possible positive impact from disposals (such

FFOPS I

1.78

0.6 %

2.05

2.4 %

n.a.

n.m.

as Bleicherode in 2021) in our estimates.

Net income

3.58

-1.9 %

4.26

0.4 %

n.a.

n.m.

EPS

0.74

-1.9 %

0.89

0.4 %

n.a.

n.m.

FY End: 31.12.

CAGR

in EUR m

(21-24e)

2018

2019

2020

2021

2022e

2023e

2024e

Rental income

7.61

9.53

12.19

14.55

17.10

20.05

22.17

Change yoy

49.2 %

25.1 %

27.9 %

19.4 %

17.5 %

17.2 %

10.6 %

EBIT

3.59

4.50

5.62

9.11

7.64

8.98

9.99

FFO I

3.65

4.62

5.87

7.06

8.41

10.08

11.18

FFO I-margin

47.9 %

48.4 %

48.2 %

48.5 %

49.2 %

50.3 %

50.4 %

EBT

2.25

2.78

3.49

6.51

4.76

5.75

6.42

Net income

1.68

2.06

2.51

5.04

3.51

4.28

4.79

EPS

0.46

0.51

0.57

1.14

0.73

0.89

1.00

FFOPS I

1.01

1.14

1.33

1.60

1.79

2.10

2.33

DPS

0.40

0.45

0.48

0.51

0.54

0.58

0.63

Dividend Yield

3.4 %

2.9 %

2.7 %

2.3 %

2.2 %

2.4 %

2.6 %

Book Value / Share

4.10

5.50

5.61

6.27

8.10

8.42

8.78

Rel. Performance vs CDAX:

1 month:

-18.2 %

P / E

25.0 x

30.1 x

30.9 x

19.5 x

33.1 x

27.1 x

24.2 x

6 months:

4.0 %

Price / Book

2.6 x

2.5 x

3.1 x

3.5 x

3.0 x

2.9 x

2.8 x

P / NAVPS

1.1 x

1.1 x

1.0 x

1.1 x

1.2 x

1.1 x

1.1 x

Year to date:

1.1 %

FFO I-Yield

8.7 %

7.5 %

7.6 %

7.2 %

7.4 %

8.7 %

9.6 %

Trailing 12 months:

28.8 %

ROE

12.3 %

10.2 %

10.2 %

19.2 %

10.5 %

10.8 %

11.6 %

LTV

62.0 %

58.2 %

60.2 %

61.3 %

60.9 %

61.9 %

62.4 %

Company events:

Guidance:

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

AGM

22.07.22

Aug.22

Q2

Nov.22

Q3

Analyst

Andreas Pläsier

COM M ENT

Published 09.06.2022 08:15

1

aplaesier@warburg-research.com

+49 40 309537-246

DEFAMA Deutsche Fachmarkt AG

RESEARCH

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").

Geogr. breakdown of rental income

Rental income by sector

% of total rental income

% of rental income

Source: Warburg Research

Source: Warburg Research

COM M ENT

Published 09.06.2022

2

DEFAMA Deutsche Fachmarkt AG

RESEARCH

Valuation

2018

2019

2020

2021

2022e

2023e

2024e

P / E

25.0 x

30.1 x

30.9 x

19.5 x

33.1 x

27.1 x

24.2 x

P / NAVPS

1.1 x

1.1 x

1.0 x

1.1 x

1.2 x

1.1 x

1.1 x

Price / Book

2.6 x

2.5 x

3.1 x

3.5 x

3.0 x

2.9 x

2.8 x

P / FFOPS I

11.5 x

13.4 x

13.2 x

13.9 x

13.5 x

11.5 x

10.4 x

FFO I-Yield

8.7 %

7.5 %

7.6 %

7.2 %

7.4 %

8.7 %

9.6 %

ROE

12.3 %

10.2 %

10.2 %

19.2 %

10.5 %

10.8 %

11.6 %

Equity Ratio

19 %

24 %

18 %

18 %

23 %

21 %

21 %

Company Specific Items

2018

2019

2020

2021

2022e

2023e

2024e

NAV/Share

11.02

13.46

16.86

19.61

19.65

21.06

22.64

Vacancy Rate

4.3 %

4.0 %

3.7 %

5.0 %

4.0 %

4.0 %

4.0 %

COM M ENT

Published 09.06.2022

3

DEFAMA Deutsche Fachmarkt AG

RESEARCH

Consolidated profit and loss

In EUR m

2018

2019

2020

2021

2022e

2023e

2024e

Total revenues

9.09

11.21

14.58

17.13

20.36

23.87

26.39

Rental income

7.61

9.53

12.19

14.55

17.10

20.05

22.17

Change yoy

49.2 %

25.1 %

27.9 %

19.4 %

17.5 %

17.2 %

10.6 %

Property operating costs

2.21

2.63

3.08

4.05

4.83

5.68

6.28

Property management costs

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Rental profit

6.87

8.57

11.49

13.08

15.54

18.19

20.11

Income from property sales

0.00

0.00

0.00

2.60

0.00

0.00

0.00

Other revenues

0.08

0.07

0.12

0.64

0.41

0.48

0.53

Gross profit

6.95

8.64

11.62

16.32

15.94

18.66

20.64

Administration expenses

0.70

0.70

0.81

0.98

1.16

1.36

1.48

Personnel expenses

0.72

1.04

1.50

1.88

2.12

2.41

2.67

Other operating income/expenses

0.00

0.00

-0.31

-0.11

-0.11

-0.11

-0.11

Unfrequent items

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

EBITDA

5.53

7.04

8.99

13.35

12.55

14.78

16.38

Valuation result

0.00

0.00

0.00

2.60

0.00

0.00

0.00

Depreciation of fixed assets

1.95

2.55

3.36

4.24

4.91

5.80

6.39

EBITA

3.59

4.50

5.62

9.11

7.64

8.98

9.99

Amortisation of intangible assets/Goodwill

0.00

0.00

0.00

0.00

0.00

0.00

0.00

EBIT

3.59

4.50

5.62

9.11

7.64

8.98

9.99

Interest income

0.00

0.01

0.01

0.01

0.00

0.00

0.00

Interest expenses

1.34

1.73

2.14

2.61

2.88

3.23

3.57

Other financial income (loss)

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Financial result

-1.34

-1.72

-2.13

-2.60

-2.88

-3.23

-3.57

EBT

2.25

2.78

3.49

6.51

4.76

5.75

6.42

Margin

24.8 %

24.8 %

24.0 %

38.0 %

23.4 %

24.1 %

24.3 %

Total taxes

-0.55

-0.71

-0.71

-0.71

-1.25

-1.47

-1.63

thereof cash taxes

-0.36

-0.42

-0.42

-0.42

-0.72

-0.88

-0.98

Net income from continuing operations

1.70

2.07

2.51

5.04

3.51

4.28

4.79

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

1.70

2.07

2.51

5.04

3.51

4.28

4.79

Minority interest

0.02

0.01

0.00

0.00

0.00

0.00

0.00

Net income

1.68

2.06

2.51

5.04

3.51

4.28

4.79

Number of shares, average

3.62

4.05

4.42

4.42

4.71

4.80

4.80

FFO (II)

3.65

4.62

5.87

7.06

8.41

10.08

11.18

FFO I-margin

47.9 %

48.4 %

48.2 %

48.5 %

49.2 %

50.3 %

50.4 %

FFOPS I

1.01

1.14

1.33

1.60

1.79

2.10

2.33

EPS

0.46

0.51

0.57

1.14

0.73

0.89

1.00

EPS adj.

0.43

0.47

0.57

1.14

0.73

0.89

1.00

*Adjustments made for:

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

Financial Ratios

2018

2019

2020

2021

2022e

2023e

2024e

Property operating costs / Rental Income

29.1 %

27.6 %

25.3 %

27.8 %

28.2 %

28.3 %

28.3 %

Operating Leverage (Real Estate)

2.9 x

5.0 x

4.6 x

6.2 x

6.8 x

7.0 x

10.5 x

Rental profit / interest expenses

5.1 x

5.0 x

5.4 x

5.0 x

5.4 x

5.6 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 09.06.2022

4

DEFAMA Deutsche Fachmarkt AG

RESEARCH

Consolidated balance sheet

In EUR m

2018

2019

2020

2021

2022e

2023e

2024e

Assets

Goodwill and other intangible assets

0.01

0.03

0.02

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

0.03

0.02

0.02

0.02

0.02

0.02

Property, plant and equipment

0.08

0.11

1.39

1.29

1.30

1.32

1.33

Investment properties

81.10

93.14

127.79

147.57

165.89

182.39

198.25

Financial assets

0.26

1.70

0.12

1.37

1.37

1.37

1.37

Other long-term assets

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Fixed assets

81.44

94.98

129.33

150.25

168.58

185.09

200.96

Inventories

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Accounts receivable

0.51

0.00

0.80

0.96

0.98

1.00

1.02

Liquid assets

2.80

6.98

4.28

1.52

2.67

2.25

2.89

Other short-term assets

0.59

-2.56

-0.66

1.94

1.15

1.55

0.89

Current assets

4.34

9.29

7.38

6.01

5.76

5.41

6.11

Total Assets

85.79

104.28

136.71

156.26

174.34

190.50

207.07

Liabilities and shareholders' equity

Subscribed capital

3.90

4.42

4.42

4.42

4.80

4.80

4.80

Capital reserve

10.03

17.31

17.31

17.31

27.19

27.19

27.19

Retained earnings

2.06

2.56

3.07

5.99

6.90

8.40

10.17

Other equity components

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Shareholders' equity

15.99

24.29

24.81

27.72

38.90

40.39

42.16

Minority interest

0.38

0.39

0.40

0.40

0.40

0.40

0.40

Provisions

1.01

0.43

0.51

0.53

0.53

0.53

0.53

thereof provisions for pensions and similar obligations

0.21

0.21

0.25

0.26

0.26

0.26

0.26

Financial liabilities (total)

67.79

76.52

110.25

124.59

131.51

146.19

161.00

Short-term financial liabilities

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Accounts payable

0.30

0.51

0.29

0.96

0.96

0.96

0.96

Other liabilities

0.70

2.54

0.86

2.46

2.45

2.43

2.42

Liabilities

69.79

79.99

111.91

128.54

135.44

150.10

164.91

Total liabilities and shareholders' equity

85.79

104.28

136.71

156.26

174.34

190.50

207.07

Financial Ratios

2018

2019

2020

2021

2022e

2023e

2024e

Return on Capital

ROA

2.4 %

2.2 %

2.1 %

3.4 %

2.1 %

2.3 %

2.4 %

ROE

12.3 %

10.2 %

10.2 %

19.2 %

10.5 %

10.8 %

11.6 %

FFO I / Equity

0.3 x

0.2 x

0.2 x

0.3 x

0.2 x

0.3 x

0.3 x

Solvency

Net Debt

65.20

69.75

106.23

123.34

129.11

144.20

158.38

Net Financial Debt

64.99

69.54

105.98

123.07

128.85

143.94

158.12

Net Fin. Debt / EBITDA

11.7 x

9.9 x

11.8 x

9.2 x

10.3 x

9.7 x

9.7 x

LTV

62.0 %

58.2 %

60.2 %

61.3 %

60.9 %

61.9 %

62.4 %

Equity Ratio

19.1 %

23.7 %

18.4 %

18.0 %

22.5 %

21.4 %

20.6 %

LTV

ROE

Book Value per Share

in %

in EUR

Source: Warburg Research

Source: Warburg Research

Source: Warburg Research

COM M ENT

Published 09.06.2022

5

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Disclaimer

Defama Deutsche Fachmarkt AG published this content on 09 June 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 09 June 2022 07:31:10 UTC.