NuWays AG: DEMIRE AG | Rating: Buy

Classification of NuWays AG to DEMIRE AG

Company Name:	DEMIRE AG
ISIN:	DE000A0XFSF0
Reason for the research:	Update
Recommendation:	Buy
from:	08.11.2024
Target price:	EUR 1.50
Target price on sight of:	12 months
Last rating change:
Analyst:	Philipp Sennewald

Rental income decreased due to smaller property portfolio, chg.

Q3 rental income declined 20% yoy to € 15.2m (eNuW: € 16.0m), caused by the lower asset base following larger disposals as well as the deconsolidation of the Limes portfolio in July (eNuW: € 8.4m annual rental income). Despite a strong letting performance in the first nine months (+121% yoy) we also saw a decreasing like-for-like contractual rental income (-3.2%), which was mainly case by the increased vacancy rate of 14.7% (vs 13.1% at YE ’23) following the insolvency of Mein Real in Querfurt. This was only partly offset by indexation effects concerning existing rental agreements. Yet, we also already saw a sequential improvement in the vacancy rate of 0.8pp in Q3. We regard the strong letting performance as a sign of operational strength as we observe a continuous weakness of the letting markets.

On this basis, we also saw a 12% yoy FFO decrease to € 7.5m (eNuW: € 7.3m), driven by negative operating leverage which was only slightly offset by an improved rental margin. Yet, an improved FFO margin of 50% shows that DMRE is able to display strong operating performances despite the significantly lowered asset base.

Against this backdrop, management confirmed the FY guidance targeting sales of € 64-66m (eNuWnew: € 66.1m) as well as a yoy decline in FFO (eNuWnew: € 28.4m vs € 36.7m in FY ’23).

Limes update. Following the insolvency of the Limes subsidiaries, management reiterated during the CC that it expects the assets to remain stable in value (eNuW: € 140m with 57% LTV). Hence, there could be upside to our estimates as we conservatively included a total loss for the company in our model.

Disposal engine running. Following two larger disposals in Ulm and Leipzig, management confirmed in the CC that it expects 3 additional smaller deals to be closed until YE ‘24e as well as several assets do be disposed in FY ‘25e. Although it is hard to get a grip on the exact volume, management was confident to dispose assets with a volume of up to € 50m until YE ‘25e, which is however below our current estimate of € 99m (GAV).

The stock remains undervalued given the significant and, in our view, unjustified NAV discount of 73%. Hence, we reiterate BUY with an unchanged PT of € 1.50 based on NAV.

You can download the research here: http://www.more-ir.de/d/31227.pdf
For additional information visit our website: www.nuways-ag.com/research

Contact for questions:
NuWays AG - Equity Research
Web: www.nuways-ag.com
Email: research@nuways-ag.com
LinkedIn: https://www.linkedin.com/company/nuwaysag
Adresse: Mittelweg 16-17, 20148 Hamburg, Germany
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Offenlegung möglicher Interessenskonflikte nach § 85 WpHG beim oben analysierten Unternehmen befinden sich in der vollständigen Analyse.
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