Buy (unchanged) Target: Euro 44.00 (old: Euro 48.00) 07 March 17 Price (Euro) 32.78 52 weeks range 36.00 / 26.21 Key Data Country Austria Industry Real Estate Segment Development (trading oriented) ISIN AT0000815402 WKN 852735 Reuters UBMV.VI Bloomberg UBS VI Internet www.ubm.at Reporting Standard IFRS Fiscal Year 31/12 Market Cap (EUR million) 244.9 Number of shares (million) 7.47 Free Float 49.9% Free Float MCap (million) 122.2 CAGR pre tax profit '15 - '18e 2.3% Multiples 2015 2016e 2017e 2018e MarketCap/revenues 0.80 0.50 0.62 0.62 PE ratio 6.7 10.4 6.8 6.5 Dividend yield 4.9% 4.9% 6.1% 6.7% Price-to-Book ratio 0.70 0.73 0.69 0.65 Key Data per Share (Euro) 2015 2016e 2017e 2018e Earnings per share (EPS) 4.90 3.16 4.86 5.05 Dividends per share (DPS) 1.60 1.60 2.00 2.20 Book Value per share (BVpS) 46.83 44.81 47.67 50.51 Financial Data (Euro '000) 2015 2016e 2017e 2018e Revenues 307,781 488,950 394,927 397,753 Operating profit (EBITDA) 76,450 61,618 74,497 73,496 Operating profit (EBIT) 73,643 58,513 71,283 70,155 Pre-tax profit (EBT) 50,285 40,483 51,937 53,850 Net profit (after minorities) 33,808 23,611 36,278 37,701 Adj. shareholders' equity 323,196 334,852 356,186 377,448 RoE after tax 14.8% 7.2% 10.5% 10.3% Financial Calendar Annual report 2016 6 April 2017 AGM 23 May 2017 1Q 2017 report 31 May 2017 Main Shareholders Syndicate Ortner/ Strauss 38.8% Management & Supervisory board 11.3% Analysts E-Mail Internet Dipl.-Kfm. Stefan Scharff, CREA Christopher Mehl, MBA scharff@src-research.de mehl@src-research.de www.src-research.de www.aktienmarkt-international.at www.aktienmarkt-international.de Second best result in history but below our forecast recently sold four assets from their Fast Track 2017 program target price reduced to 44 Euros Yesterday evening,, an Austrian real estate developer, published their 2016 prelims. With the second best result in company s history, UBM had a pre-tax profit of more than Euro 40m, which is, however, well below their record 2015 year numbers and also below our estimates of almost Euro 54m. The company s total output declined to about Euro 557m, compared to about Euro 593m in 2015. Keep in mind that the net effect of property fair value adjustments was Euro 7m higher in 2015 than in 2016. The net debt position further increased to more than Euro 690m and will peak later, in 1Q 2017 to about Euro 750m, as already communicated multiple times by the firm, due to recent transactions and a number of ongoing projects. However, the already announced trading activities, which have not become effective yet, along with further transactions throughout this year, will drastically reduce that position in 2017 to a much more comfortable level, thereby strongly increasing the equity value of the company. With about Euro 600m of sales proceeds in 2017, and only about 400m of investments, an excess of Euro 200m of cash proceeds should bring the net debt position to about Euro 550m at year-end, as guided by the company (see depiction net debt reduction ). We further expect that trend to continue over the coming years, even though at a reduced speed. UBM has a strong pipeline over the next years that will allow them to secure strong revenues over the long-term (see depiction Pipeline 2017-2020 ). Unfortunately, the company gave no guidance in regards to total output or earnings for 2017, something that in our opinion would have been appreciated. However, we estimate that the 2017 figures will turn out to be slightly above the record numbers of 2015. UBM furthermore stated that it will propose a dividend of Euro 1.60 at their annual general meeting in May, which is the same as last year s dividend but below our estimate of Euro 2.50, most likely because of the reduced earnings and the need for capital for the development pipeline. We believe that the company has a very good pipeline and that the targeted net debt reduction will be accomplished and is going to result in an increased equity value. Due to the below-estimates 2016 earnings and without giving a profit guidance for the current year, even after a row of good deals and forward deals, we reduce our P & L estimates for 2017 and 2018. We decided to reduce our target from Euro 48.00 to Euro 44.00. With a share price well below Euro 35 and with the lucrative pipeline and already existing deals (almost one third of the year s target) we maintain our Buy recommendation for the UBM share.
Solid net debt reduction to come Lucrative Pipeline 2017-2020 Last Tuesday, 28 February, UBM announced the sale of the Magna logistics and operations center in Graz, Austria, which was part of the strategic sales program Fast Track 2017. The asset was sold for a price of Euro 17m in a forward deal to an independent real estate management company, Palmira Capital Partners, thereby reducing the company s net debt position by the full Euro 17m amount after closing. The well connected development was completed in January 2017, and the 22k sqm are fully let to Magna Steyr Fahrzeugtechnik AG & Co. The Transaction is expected to be closed in the course of 2Q 2017. On 23 February, UBM published the sale of two Angelo Hotels, both of which were part of the Fast Track 2017 as well. One of the hotels was located in Pilsen (Czech Republic) and the other one in Katowice (Poland). Both of the properties were developed in a 50/50 joint venture together with Warimpex and now sold to an investor from Thailand, U City Public Co Ltd. The sale should be closed in the second quarter of 2017, where effects on the financial statements will become effective. Of the total sales proceeds of Euro 34m, a share of Euro 17m goes to UBM, whereas the other half goes to the joint venture partner Warimpex. It furthermore will have a positive Euro 5m effect on UBM s net debt position. The four-star hotel in Katowice was opened in 2010 with 203 rooms and is located right in the city center. The Angelo Hotel Pilsen was opened two years earlier in 2008. It is located right opposite of the Pilsner Brewery and has a total of 144 rooms. Furthermore, on Monday 13 February, UBM sold another asset in Krakow, Poland, which was also part of the Fast Track 2017 program. The 48 meters high Pilot Tower, with a lettable office space of around 10k sqm and about 400 sqm of retail space, was completed in 2014 and now sold to First Property Group for net sales proceeds of Euro 22m. With closing expected for the second quarter of 2017, it will also positively affect net debt with the full value of the sales proceeds, thereby reducing it by Euro 22m. With the sales of the four properties, UBM came one step closer in their transformation of being a pure play property developer by further reducing their standing assets and thereby increasing their share of developments in the portfolio, which is also the continued strategic plan for the next years. It also shows that their developments in Eastern Europe are an attractive target for investors, which is crucial as about 30% of UBM s portfolio is located in Poland. 2 2 SRC Equity Research
. 3 3 SRC Equity Research
P & L 31/12 IFRS (Euro '000 except for per share-data) 2012* 2013* 2014* Pro forma 2014 2015 2016e 2017e 2018e CAGR '15 - '18e Revenues 133,975 217,226 241,140 315,317 307,781 488,950 394,927 397,753 8.9% Changes in the portfolio 26,503 45,105-68,917 30,810 39,000 Own work capitalised in non-current assets 0 310 925 925 1,205 1,300 1,100 1,100 Share of profit/loss of companies accounted for under the equity method 4,557 12,764 15,683 24,817 25,322 6,500 6,900 7,500 Income from fair-value adjustments to investment property 0 0 4,421 5,810 29,675 54,589 14,780 14,120 Other operating income 7,792 2,269 4,222 7,137 8,759 14,566 6,800 7,450 Cost of materials and other related production services -83,826-145,539-178,547-244,570-252,720-321,020-284,752-297,455 Staff expenses -17,875-20,385-21,523-34,193-37,305-41,878-42,565-43,562 Expenses from fair-value adjustments to investment property 0-12,749 0-2,880-3,109-20,522-3,478-2,954 Other operating expenses -30,113-22,043-21,523-34,193-48,263-51,950-50,025-49,456 Operating profit (EBITDA) 14,509 31,853 44,798 64,673 76,450 61,618 74,497 73,496 Depreciation, amortisation and impairment expenses -2,366-2,453-2,384-3,339-2,807-3,105-3,214-3,341 Operating profit (EBIT) 12,143 29,400 42,414 61,334 73,643 58,513 71,283 70,155-1.6% Financial income 18,581 6,395 6,690 12,449 7,407 6,125 5,674 6,145 Finance costs -17,853-17,952-18,087-34,524-30,765-24,155-25,020-22,450 Financial result 729-11,556-11,397-22,075-23,358-18,030-19,346-16,305 Earnings before tax (EBT) 12,872 17,843 31,017 39,259 50,285 40,483 51,937 53,850 2.3% Income tax expense 812-4,316-3,174-3,151-12,952-15,370-13,348-13,463 Tax rate -6.3% 24.2% 10.2% 8.0% 25.8% 38.0% 25.7% 25.0% Net profit before minorities 13,684 13,528 27,843 36,108 37,333 25,113 38,589 40,388 2.7% Minorities -796-672 -455-2,064-3,525-1,502-2,311-2,687 Net profit after minorities 12,888 12,856 27,388 34,044 33,808 23,611 36,278 37,701 3.7% Earnings per share (EPS) 2.15 2.14 4.56 5.66 4.90 3.16 4.86 5.05 Dividends per share (DPS) 0.55 0.62 1.25 1.25 1.60 1.60 2.00 2.20 11.2% Payout ratio 25.6% 28.9% 27.4% 22.1% 32.7% 50.6% 41.2% 43.6% Number of shares ('000) 6,000 6,000 6,010 6,010 6,902 7,472 7,472 7,472 Adjusted shareholders' equity without minorities 152,758 161,867 178,375 133,869 323,196 334,852 356,186 377,448 Total assets 632,991 630,776 756,374 1,077,384 1,185,236 1,233,688 1,027,520 1,042,933 Equity ratio 24.1% 25.7% 23.9% 12.4% 28.0% 27.7% 35.3% 36.8% Book value per share (BVpS) 25.46 26.98 29.68 22.27 46.83 44.81 47.67 50.51 2.6% RoE (after tax) 8.7% 8.2% 16.1% 25.4% 14.8% 7.2% 10.5% 10.3% * Figures of UBM Realitäten AG (before merger) Key ratios & figures 2012* 2013* 2014* Pro forma 2014 2015 2016e 2017e 2018e Growth rates in % Sales revenues -31.8% 62.1% 11.0% n.a. -2.4% 58.9% -19.2% 0.7% EBIT -45.1% 142.1% 44.3% n.a. 20.1% -20.5% 21.8% -1.6% EBT -11.6% 38.6% 73.8% n.a. 28.1% -19.5% 28.3% 3.7% Net profit after minorities 30.2% -0.3% 113.0% n.a. -0.7% -30.2% 53.6% 3.9% Margins in % Operating profit (EBIT) 9.1% 13.5% 17.6% 19.5% 23.9% 12.0% 18.0% 17.6% Pre-tax profit (EBT) 9.6% 8.2% 12.9% 12.5% 16.3% 8.3% 13.2% 13.5% Net Profit (after minorities) 9.6% 5.9% 11.4% 10.8% 11.0% 4.8% 9.2% 9.5% Expense ratios in % Personnel costs to sales 13.3% 9.4% 8.9% 10.8% 12.1% 8.6% 10.8% 11.0% Cost of material to sales 62.6% 67.0% 74.0% 77.6% 82.1% 65.7% 72.1% 74.8% Depreciation to sales 1.8% 1.1% 1.0% 1.1% 0.9% 0.6% 0.8% 0.8% Profitability in % Return on equity (RoE) after tax 8.7% 8.2% 16.1% 25.4% 14.8% 7.2% 10.5% 10.3% Return on assets (RoA) 2.0% 2.0% 3.6% 3.2% 2.9% 2.1% 3.3% 3.4% Valuation P/E-ratio 15.3 15.3 7.2 5.8 6.7 10.4 6.8 6.5 Price/ BV per Share 1.29 1.22 1.10 1.47 0.70 0.73 0.69 0.65 Dividend yield 1.7% 1.9% 3.8% 3.8% 4.9% 4.9% 6.1% 6.7% * reported figures of UBM Realitäten AG 4 4 SRC Equity Research
SRC Research - The Specialist for Financial and Real Estate Stocks - SRC - Scharff Research und Consulting GmbH Klingerstr. 23 D-60313 Frankfurt Germany Fon: +49 (0)69/ 400 313-80 Mail: scharff@src-research.de Internet: www.src-research.de Rating Chronicle Date Rating Former Price Former Target 23 November 2016 Buy 30.95 48.00 01 September 2016 Buy 32.80 52.00 27 April 2016 Buy 34.00 58.00 25 February 2016 Buy 30.95 58.00 11 February 2016 Buy 30.22 58.00 12 November 2015 Buy 34.20 58.00 28 August 2015 Buy 36.40 58.00 28 July 2015 Buy 36.97 63.00 21 April 2015 Buy 41.50 63.00 15 April 2015 Buy 41.54 63.00 09 April 2015 Buy 39.90 63.00 UBM AG* 02 September 2014 Hold 23.40 24.00 UBM AG* 18 July 2014 Hold 23.70 24.00 UBM AG* 29 April 2014 Buy 17.00 24.00 * UBM Realitäten AG (before the merger with PIAG Immobilien AG in Feb. 2015) Please note: The UBM share price mentioned in this report is from 6 March 2017. UBM mandated SRC Research for covering the UBM share. Disclaimer 2017: 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 originates from carefully selected sources with 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 which is not necessarily the same opinion as SRC- Scharff Research und Consulting GmbH or another staff member. All the opinions and assessment made in this report may be changed without prior notice. Within the scope of German regulative framework the author and SRC-Scharff Research und Consulting GmbH do not assume any liability for this document or its content being used. This report is solely for information purposes and does not constitute a request or an invitation or a recommendation to buy or sell any stock that is mentioned here. Private clients should obtain personal advice at their bank or investment house and should keep in mind that prices and dividends of equities can 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 having no long or short-positions in equities or derivatives related to equities mentioned in this report. Reproduction, distribution or publishing this report and its content as a whole or in parts is only allowed with approval of SRC management 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. 5 5 SRC Equity Research