S IMMO Accumulate (old: Buy) Target: Euro 17.50 (old: Euro 16.00) 06 April 2018 Price (Euro) 16.50 52 weeks range 16.50 / 11.50 Key Data Country Austria Industry Real Estate Market Segment Prime Market ISIN AT0000652250 WKN 902388 Symbol T1L Reuters SIAG.VI Bloomberg SPI AV Internet www.simmoag.at Reporting Standard IFRS Fiscal Year 31/12 Founded 1986 IPO 1987 Market Cap (EUR million) 1104.1 Number of shares (million) 66.9 Free Float (approx.) 67% Free Float MarketCap (Euro million) 739.8 CAGR (EBITDA '17-20e) 5.3% Multiples 2017 2018e 2019e 2020e Market cap/ Revenues-Ratio 5.7 5.9 5.8 5.6 P/E-Ratio 8.4 11.4 10.5 10.0 Dividend Yield 2.4% 2.4% 2.7% 3.0% Key Data per Share (Euro) 2017 2018e 2019e 2020e Earnings per Share (EpS) 1.97 1.45 1.57 1.65 Dividends per Share (DpS) 0.40 0.40 0.45 0.50 Book Value per Share (BVpS) 13.66 14.70 15.81 16.95 EPRA NAV per share 17.63 18.69 20.09 21.60 FFO I per share 0.64 0.60 0.64 0.69 Financial Data (Euro '000) 2017 2018e 2019e 2020e Revenues 191,421 186,957 200,996 206,494 Rental income 112,020 105,299 111,722 113,956 Net revaluation result 127,592 86,995 77,885 78,650 Operating cash profit (EBITDA) 89,556 81,038 99,513 104,447 Operating Profit (EBIT) 208,149 159,378 168,443 173,842 Pre-tax profit (EBT) 160,748 116,175 125,966 132,640 Net profit after minorities 130,091 96,274 104,282 109,499 Shareholders' Equity 914,335 983,856 1,058,004 1,133,986 RoE after tax 15.5% 10.1% 10.2% 10.0% Financial Calendar AGM 1Q 2018 2Q 2018 SRC Forum Financials & Real Estate Main Shareholders RPR Privatstiftung 22% Vienna Insurance Group 10% Own shares 1% Analyst Internet May 3, 2018 May 29, 2018 August 30, 2018 September 6, 2018 Dipl.-Kfm. Stefan Scharff, CREA Fon: +49-(0)69 400 313-80 scharff@src-research.de www.src-research.de www.aktienmarkt-international.at www.aktienmarkt-international.de Sound 2017 numbers slightly above our forecast a hike in FFO, EPRA NAV and a good cycle management lead us to a higher target price of Euro 17.50 Yesterday, S IMMO released the 2017 annual report and invited for a conference call. All in all, the EBIT and bottom line as well as the revaluation were slightly above our forecast, whereas rental income, financial result and FFO were in-line. After 2016 record year, the company remained on a high level of revenues despite the tremendous trading activities in 2016 and 2017. Rental income was still at high Euro 112m, after Euro 118m in 2016. FFO I even climbed from Euro 40m to almost Euro 43m. The revaluation result remained high, near Euro 128m (FY 2016: Euro 194m, SRC forecast 114m), driven by some letting success in all markets and the yield compression, in particular in Germany, but also in Austria and CEE. Keep in mind that the portfolio is still not aggressively priced at 4.9% yield for Germany, 5.1% yield for Austria and an 8.2% yield for the CEE markets (all vacancy rates still at very low levels between 4% in CEE and 7% in Austria). The operating profit on EBIT level was at high Euro 208m and slightly beat our Euro 205m forecast which was not too conservative in our view. After a good net financial result -25%, from Euro 55m to only Euro 41m and in-line with our forecast, this translated into a bottom line result above our expectations. The net income after minorities came in at Euro 130m. Our full year forecast was only at approx. Euro 126m. The firm proved a very decent cycle management with buying at cheap prices in former years and selling after development or modernization of properties to unlock hidden values. The sale of Hoch Zwei and Plus Zwei Vienna offices as well as Sofia Serdika retail center were very good examples. With losing these properties the FFO in 2018 would decline by about Euro 6m or Euro 7m but S IMMO already bought some properties in Germany and is on the way to finish the Bucharest The Mark or the Bratislava Einsteinova soon. The Sun Plaza extension in Bucharest is already done with 40 new tenants. The focus in the German market moved away a bit from Berlin to secondary cities for some residential buys, like Leipzig, Magdeburg, Kiel, Rostock, Bremen might be more interesting for higher yields. A good move, in our view. Besides the promising project pipeline with 300k sqm there is some more upside from the declining Cost of Debt of 2.7% (2016: 3.1%) which might further decline to c. 2.5% range now. We like the numbers and expect only a small dip in 2018 from Euro 43m to Euro 40m in the FFO I which is a success after the great sale transactions exploiting the excellent market environment. We lift our target price to Euro 17.50, which is supported by a steep 21% hike in EPRA NAV per share to Euro 17.63. After the hike in share price, rating down from Buy to Accumulate.
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Diversified portfolio located in strong locations in Germany, Austria and CEE S IMMO has a well diversified portfolio. As of the end of 2017, about 66% of the portfolio is located in Germany and Austria, while the remaining 34% are located the CEE region. With the exception of Germany, almost all properties are located in primary cities, and in the CEE region exclusively in the capitals of the respective countries. Currently the portfolio consists of 241 objects with a total book value of about Euro 1.84bn. Germany has grown from Euro 660m last year to more than Euro 770m now and currently represents 42% of the portfolio with a vacancy rate of 5.7% (2016: 5.5%) and a rental yield of 4.9% (2016: 5.1%). The Austrian portion has significantly decreased from more than Euro 630m in 2016 to Euro 440m at the end of 2017 and currently makes up for about 24% of the total portfolio. The vacancy rate in Austria has slightly decreased from 7.1% in 2016 to7.0% while the rental yield slightly increased to 5.1% compared to 5.0% in 2016. The CEE region shrank as well and currently has a book value of almost Euro 630m compared to more than Euro 770m last year and now makes up for 34% of the total portfolio. The vacancy rate of that region significantly came down from 6.2% to only 3.7% while the rental yield remained constant at 8.2%. At a rental yield of 8.2% we still see plenty of potential in the property values in the CEE region to be realized in the next years. Source: company presentation, 5 April 2018 The total portfolio has a low vacancy rate of 5.2% and a rental yield of 6.1%. The total lettable area is about 1.2m sqm and the portfolio is divided between commercial (73%) and residential (27%). The tenant structure is well diversified as well as no single tenant contributes more than 5% of rental revenues and the top 15 tenants make up for less than 30% of revenues. The WALT of the top 15 tenants is at 6.73 years long-term oriented 3 3 SRC Equity Research
Current Projects to drive earnings in the coming years The company currently has 19 projects with a total investment volume of about Euro 730m. Eleven of these are located in Germany with an investment volume of about Euro 380m, such as the 101 Neukölln Project in Berlin where an office and retail space of about 24k sqm is to be created. A building permission was granted early 2018. Three projects are currently in Austria for an investment volume of more than Euro 200m. Amongst those are the QBC Project in Vienna which is for a prime office space of up to 42k sqm and the Siebenbrunnengasse project, where about two-thirds of a commercial object is being converted into apartments. Five more projects are based in the CEE region and have an investment volume of Euro 145m. Two examples are the Einsteinova in Brasilava where more than 23k sqm of office property, of which more than 95% has already been pre-let, is to be completed in 2018 or the project The Mark in Bucharest where about 25k sqm of office space is to be completed by the end of 2018. From 2019 on, The Mark should contribute c. Euro 4.5m to Euro 5.0m per year to the group s rental income. All these projects will further drive S IMMO s earnings in the coming years and new projects will be added as well. Improved financing conditions and capital structure In terms of financing the company made some good progress in 2017. The average cost of funding came down from 3.12% at year-end 2016 to now only 2.67%. The average interest rate of long-term loans is currently at a low level of 1.63%. We still see further potential for a decline in the cost of funding to about 2.5% in our opinion. Already in February 2018, S IMMO has issued two new bonds at lucrative rates of 1.75% and 2.875% for a very long term bond respectively. The impact of the lowered funding cost could already be seen at the 2017 results and we expect that effect to be also present in the coming years. Furthermore, the firm s LTV was significantly decreased to below 50% in 2017 and came down from 56% in 2016 to 49%. The equity ratio improved as well. At year-end 2017 S IMMO had 42% of equity in their balance sheet compared to only 36% a year ago. 4 4 SRC Equity Research
P&L Account for 31/12 IFRS (Euro '000) 2013 2014 2015 2016 2017 2018e 2019e 2020e CAGR '17 - '20e Revenues 193,735 188,491 190,697 198,754 191,421 186,957 200,996 206,494 2.6% thereof rental income 116,707 111,845 111,686 118,174 112,020 105,299 111,722 113,956 thereof revenues from service charges 36,827 34,542 33,465 37,657 33,435 34,772 41,254 43,317 thereof revenues from hotel operations 40,201 42,104 45,546 42,923 45,966 46,885 48,020 49,221 Other operating income 6,186 4,700 3,534 3,405 2,866 2,809 3,945 3,866 Expenses directly attributable to properties -60,603-55,841-55,841-64,152-59,877-61,554-62,969-64,732 Gross margin property segment 60.5% 61.9% 61.5% 58.8% 58.8% 56.1% 58.8% 58.8% Hotel operating expenses -29,747-31,344-33,164-32,037-36,232-36,377-34,582-34,755 Gross operating profit hotels (GOP) 10,454 10,760 12,382 10,886 9,734 10,508 13,438 14,466 Gross margin within hotel segment 26.0% 25.6% 27.2% 25.4% 21.2% 22.4% 28.0% 29.4% Revenues less directly attributable expenses 109,571 106,006 105,226 105,970 98,178 91,835 107,390 110,872 4.1% Total Gross margin 56.6% 56.2% 55.2% 53.3% 51.3% 49.1% 53.4% 53.7% Net operating income (NOI) 103,385 101,306 101,692 102,565 95,312 89,026 103,445 107,006 3.9% NOI-margin 53.4% 53.7% 53.3% 51.6% 49.8% 47.6% 51.5% 51.8% Net Gains on property disposal 6,414 180 5 5,133 10,341 7,123 9,685 11,400 Management expenses -15,078-16,050-16,483-18,635-18,963-17,920-17,562-17,825 thereof personnel expenses -5,730-6,019-7,665-8,916-8,796-9,356-9,214-9,072 EBITDA 100,907 90,136 88,748 92,468 89,556 81,038 99,513 104,447 5.3% EBITDA-margin 52.1% 47.8% 46.5% 46.5% 46.8% 43.3% 49.5% 50.6% Depreciation -11,992-7,635-7,695-7,823-8,999-8,655-8,955-9,255 Property Revaluation 6,879 56,552 84,645 194,035 127,592 86,995 77,885 78,650 Operating profit (EBIT) 95,794 139,053 165,698 278,680 208,149 159,378 168,443 173,842-5.8% EBIT-margin 49.4% 73.8% 86.9% 140.2% 108.7% 85.2% 83.8% 84.2% EBIT-profit without revaluation result 88,915 82,501 81,053 84,645 80,557 72,383 90,558 95,192 5.7% Net financial result -53,901-71,737-48,892-55,297-41,437-39,862-42,477-41,203 Participating certificates expenses (hybrid capital) -9,286-7,485-4,553-6,912-5,964-3,340 0 0 Earnings before tax (EBT) 32,607 59,831 112,253 216,471 160,748 116,175 125,966 132,640-6.2% EBT margin 16.8% 31.7% 58.9% 108.9% 84.0% 62.1% 62.7% 64.2% Income tax expense -4,553-25,682-35,004-12,148-27,278-19,802-21,440-22,855 Tax rate 14.0% 42.9% 31.2% 5.6% 17.0% 17.0% 17.0% 17.2% Net profit 28,054 34,149 77,249 204,323 133,470 96,373 104,526 109,785-6.3% Minorities -745-2,824 960-5,864-3,379-99 -244-286 Net profit after minorities 27,309 31,325 78,209 198,459 130,091 96,274 104,282 109,499-5.6% Return on sales 14.1% 16.6% 41.0% 99.9% 68.0% 51.5% 51.9% 53.0% Number of shares (in million) 66.9 66.9 66.9 66.9 66.9 66.9 66.9 66.9 Earnings per Share (EPS) in Euro 0.41 0.47 1.17 2.98 1.97 1.45 1.57 1.65-5.9% Dividends per Share (DPS) in Euro 0.20 0.24 0.30 0.40 0.40 0.40 0.45 0.50 Book Value per Share (BVPS) in Euro 10.99 8.06 9.01 11.49 13.66 14.70 15.81 16.95 Total assets 1,879,648 1,894,672 2,067,356 2,278,900 2,272,255 2,317,700 2,391,867 2,439,704 2.4% Shareholders' equity (after dividend payment) 510,710 539,337 603,189 769,120 914,335 983,856 1,058,004 1,133,986 7.4% Shareholders' equity incl. participating certificates 735,710 634,876 659,148 819,120 971,052 983,856 1,058,004 1,133,986 Equity ratio without minorities with hybrid capital 39% 34% 32% 36% 43% 42% 44% 46% Return on Equity (RoE) 5.6% 6.0% 13.7% 28.9% 15.5% 10.1% 10.2% 10.0% Key ratios & figures 2013 2014 2015 2016 2017 2018e 2019e 2020e Growth rates in % Revenues -1.5% -2.7% 1.2% 4.2% -3.7% -2.3% 7.5% 2.7% EBITDA 2.1% -10.7% -1.5% 4.2% -3.1% -9.5% 22.8% 5.0% EBIT -10.3% 45.2% 19.2% 68.2% -25.3% -23.4% 5.7% 3.2% EBT 1.3% 83.5% 87.6% 92.8% -25.7% -27.7% 8.4% 5.3% Net profit after minorities 7.8% 21.7% 126.2% 164.5% -34.7% -27.8% 8.5% 5.0% Margins in % EBITDA 52.1% 47.8% 46.5% 46.5% 46.8% 43.3% 49.5% 50.6% EBIT 49.4% 73.8% 86.9% 140.2% 108.7% 85.2% 83.8% 84.2% EBT 16.8% 31.7% 58.9% 108.9% 84.0% 62.1% 62.7% 64.2% Expense ratios in % Depreciation to sales -6.2% -4.1% -4.0% -3.9% -4.7% -4.6% -4.5% -4.5% Tax rate 14.0% 42.9% 31.2% 5.6% 17.0% 17.0% 17.0% 17.2% Profitability in % Profit margin 14.5% 18.1% 40.5% 102.8% 69.7% 51.5% 52.0% 53.2% Return on equity (RoE) after tax 5.6% 6.0% 13.7% 28.9% 15.5% 10.1% 10.2% 10.0% Return on Assets (RoA) 4.2% 1.8% 3.7% 9.0% 5.9% 4.2% 4.4% 4.5% Return on Investment (RoI) 1.5% 1.8% 3.7% 9.0% 5.9% 4.2% 4.4% 4.5% Valuation P/E-ratio 40.43 35.25 14.12 5.54 8.36 11.39 10.52 10.02 P/S-ratio 5.70 5.86 5.79 5.56 5.77 5.91 5.49 5.35 Price/BVpS (PBV) 1.50 2.05 1.83 1.44 1.21 1.12 1.04 0.97 Dividend yield in % 1.2% 1.5% 1.8% 2.4% 2.4% 2.4% 2.7% 3.0% Data per share Number of shares in million 66.9 66.9 66.9 66.9 66.9 66.9 66.9 66.9 EPS 0.41 0.47 1.17 2.98 1.97 1.45 1.57 1.65 DPS 0.20 0.24 0.30 0.40 0.40 0.40 0.45 0.50 BVPS 10.99 8.06 9.01 11.49 13.66 14.70 15.81 16.95 FFO I per share 0.50 0.32 0.52 0.60 0.64 0.60 0.64 0.69 5 5 SRC Equity Research
SRC Research - The Specialist for Financial and Real Estate Stocks - SRC - Scharff Research und Consulting GmbH Klingerstrasse 23 D-60313 Frankfurt Germany Fon: +49 (0)69 / 400 313-80 Mail: scharff@src-research.de Internet: www.src-research.de Rating Chronicle Company Date Rating Former Price Former Target S IMMO 28 November 2017 Buy 14.83 16.00 S IMMO 29 August 2017 Buy 12.80 14.50 S IMMO 30 May 2017 Accumulate 12.53 13.50 S IMMO 11 April 2017 Accumulate 11.93 13.00 S IMMO 07 March 2017 Buy 11.70 13.00 S IMMO 17 February 2017 Buy 11.34 13.00 S IMMO 29 November 2016 Buy 9.89 12.00 S IMMO 25 August 2016 Buy 8.77 11.50 S IMMO 15 August 2016 Buy 8.51 11.50 S IMMO 24 May 2016 Buy 8.67 10.50 S IMMO 01 April 2016 Buy 8.15 10.00 Please note: The share price mentioned in this report is the closing price of 5 April 2018. S IMMO mandated SRC Research for covering the S IMMO share. Disclaimer 2018: This equity research report is published by: SRC-Scharff Research und Consulting GmbH, Klingerstr. 23, D-60313 Frankfurt, Germany (short name: SRC Research). All rights reserved. Although we feel sure that all information in this SRC report stem from carefully selected sources with a high credibility, we cannot give any guarantee for accuracy, trueness and completeness. All opinions quoted in this report give the current judgement of the author that not necessarily is the same opinion as SRC-Scharff Research und Consulting GmbH or another staff member. All in this report made opinions and judgements might be changed without a pre-announcement. Within the scope of German regulative framework author and SRC- Scharff Research und Consulting GmbH do not assume any liability for using this document or its content. This report is just for information purposes and not a request or an invitation or a recommendation to buy or sell any stock that is mentioned here. Private clients should search for personal advice at their bank or investment house and should keep in mind that prices and dividends of equities might rise and fall and that nobody can give a guarantee of the future development of equities. The author of this report and the SRC-Scharff Research und Consulting GmbH commit themselves on a unsolicited basis to have no long- or short-positions in equities or derivatives related to equities mentioned in this report. Reproduction, distribution and publishing of this report and its content as a whole or in parts is only allowed with an approval of SRC management board in written form. With acceptance of this document you agree with all regulations mentioned here and all general terms and conditions you will find at anytime at our website www.src-research.de. 6 6 SRC Equity Research