Some analysts mention “very good results”, others call it “the biggest surprise” or consider Deutsche Beteiligungs AG’s interim results to be “ahead of expectations”. What impressed analysts most was the growth in net asset value. Compared to expectations at the beginning of the financial year, this important key performance indicator has clearly outperformed expectations during the first six months: taking into account the dividend distributed in February 2021, NAV rose by 13.4 per cent. And the key performance indicator of the second segment, Fund Investment Services, has in the first half of the year also already achieved more than half of the anticipated annual results of between 15 and 16 million euros, namely 9.1 million euros.
However, analysts are not basing their “buy” recommendations on what DBAG has achieved, but rather on the potential within DBAG’s portfolio: investments in currently 33 SMEs, the vast majority of which are based in Germany and neighbouring European countries. At the most recent reporting date (31 March), these investments were valued at 1.3 times initial acquisition cost. Tom Mills, analyst at Jefferies, calls that “conservative”, compared to the track record of former investments which were sold at 2.7 times the cost on a long-term average. Marie-Thérèse Grübner (Hauck & Aufhäuser) says that the valuation is “modest”. And Stephan Scharff and Christopher Mehl (SRC Research) see “significant upside” in view of this valuation.
Analysts are largely basing their optimism on the near future, pointing out that, with the half-year figures, DBAG has already exceeded the lower end of the forecast for the ongoing financial year, which was raised in March 2021. This applies to net income from investment activity and net income alike: DBAG generated net income from investment activity of 70.7 million euros and net income of 73.1 million euros in the first six months, and has thus nearly reached the full-year target ranges of “65 to 75 million euros” and “70 to 80 million euros”, respectively. In light of this development, Cansu Tatar and Eggert Kuls from Warburg Research deem the guidance “conservative” and confirm their “buy” recommendation.
Analysts are viewing the capital increase from two perspectives, emphasising on the one hand that the new shares were issued at a price both below net asset value and equity per share as at 31 March. According to Christopher Brown, one of the most experienced analysts in the sector, this might be seen as controversial, only to add matter-of-factly and in the same sentence (presumably referring to the equalising effect of subscription rights): “but for investors who follow their money they do not suffer any actual value dilution.”
On the other hand, analysts are turning their attention to the opportunities arising for DBAG due to enhanced availability of capital, which has not only improved as a result of net inflows from the approximately 100 million euros rights issue, but also as a result of another extension of the credit line. Furthermore, there are the proceeds from recently agreed and completed disposals. Analysts sum up DBAG’s current “firepower” as being around 200 million euros and compare this figure to the investment target for the current and the two following financial years of around 360 million euros.
Surprisingly positive results, a “conservative” valuation (as seen by the analysts), and a significantly stronger capital base – those are the three arguments leading the professional capital markets observers to their “buy” recommendations. Among the analysts, Jefferies analyst Tom Mills puts it most clearly: “This is a rare opportunity to buy a private markets stock where management is valuing its portfolio conservatively and the market is valuing its stock stingily.”
14 June 2021
Baader Helvea Equity Research
14 June 2021
Jefferies International Limited
17 May 2021
Hauck & Aufhäuser
12 May 2021
Warburg Research GmbH
Cansu Tatar/Eggert Kuls
12 May 2021
SRC Research GmbH
Stefan Scharff/Christopher Mehl
12 May 2021
J.P. Morgan Cazenove
Research reports are generally aimed at professional investors and are therefore not available to the public. Legal restrictions mean that only Warburg Research and Edison Research reports are available to download from the DBAG website. It shows a regularly updated table of analyst recommendations and target prices.
Baader Helvea Equity Research Company Flash 14 June 2021
Jefferies Equity Research 14 June 2021
Hauck & Aufhäuser Update 17 May 2021
J.P. Morgan Cazenove Investment Companies Daily 12 May 2021
SRC Research Update 12 May 2021
Warburg Research First Glance 12 May 2021