Warimpex - SRC Research

Warimpex
BUY
(unchanged)
Target: Euro 2.50 (unchanged)
) 05
Kursziel:
xx
| Nov | 2012
Price (Euro)
52 weeks range
0.92
Sale of Intercontinental Warsaw successfully concluded – Euro 25m FCF expected
1.22 / 0.65
Key data
AT0000827209
ISIN
Reuters
Bloomberg
Reporting standard
Market Cap (Euro million)
Shares outstanding (million)
Free Float
Free Float MarketCap (m)
3 years CAGR (sales '11 - '14e)
WXFB.VI
WXT AV
IFRS
49.7
54.0
40%
19.9
4.8%
Multiples
2011 2012e 2013e 2014e
MarketCap/ Revenues
PE Ratio
Dividend Yield
0.77
7.7
0.0%
0.68
2.0
0.0%
0.69
0.66
7.9
7.3
8.7% 10.9%
Last week Warimpex announced the successful conclusion of the sale negotiations regarding the sale of the
landmark-property Hotel InterContinental in Warsaw. On
April 24, Warimpex had already reported the signing of
the Head of Terms for the sale of its 50% stake in the
property. Initially we expected the closing of the transaction within 3Q already. Buyer of the property is a German real estate fund of DekaBank. Due to the local closing prerequisites of such real estate deals in Poland, the
final closing of the deal will take another estimated 6-7
weeks but should be completed within fiscal 2012. The
transaction price is fixed at more than Euro 100m and
may even rise up to 15% depending on the current operating performance of the hotel.
Financial data (Euro million)
Warimpex, together with Austrian developer UBM developed the property together and held 50% of the hotel un0.12
0.46
0.12
0.13 til now. Thanks to the significantly lower book value of
0.00
0.00
0.08
0.10
the property, we estimate a profit of more than Euro 20m
2011 2012e 2013e 2014e for Warimpex.
Total Revenues
thereof Hotels and Resorts
thereof Development & AM
Material expenses
Personnel expenses
Operating profit (EBIT)
Net financial result
Pre-tax profit
Net profit after minorities
64.9
58.6
6.3
-27.0
-18.8
9.7
-15.0
7.1
6.5
Key data per Share
2011 2012e 2013e 2014e
EPS (Earnings per Share)
Dividends per Share
73.1
65.2
7.9
-27.8
-19.8
29.2
-15.7
25.5
24.7
72.4
66.8
5.6
-30.0
-20.4
11.5
-16.2
7.3
6.3
74.8
69.1
5.7
-32.4
-21.0
10.5
-15.8
7.2
6.8
Main Shareholders
Dr. Franz Jurkowitsch (CEO)
Dkfm. Georg Folian (Deputy CEO)
Amber Trust
Bocca Trust
Aviva OFE
BPH TFI
14%
14%
11%
11%
> 5%
> 5%
Financial calendar
9M 2012 report
Annual report 2012
28 Nov 2012
25 Apr 2013
Analysts
Stefan Scharff, CREA
Denis Kuhn
Mail
[email protected]
[email protected]
Internet
www.src-research.de
www.aktienmarkt-international.at
In addition, Warimpex and UBM will be able to further
generate profit from the property via retaining ownership
of the operating company (Pachtgesellschaft). The operating company will lease back the property from the new
buyer and continue to operate the hotel under the brand
of Intercontinental. Both Intercontinental and the owner
of the property will receive a fixed fee, allowing for a
fixed return for the fund investors. Hence, Warimpex
may generate further returns resulting from any outperformance of the hotel. As the 45-storey hotel (third-tallest
hotel in Europe) and its restaurants have received numerous awards including Poland’s leading hotel, Poland’s leading business hotel and a Guide Michelin recommendation within the last three years as well as the
European Business Award 2012, we expect the hotel to
continue its very successful operating performance.
We forecasted 1-2 major sales transactions for 2012 and
applaud this step as it enables the group to reduce financial liabilities and boost both its liquidity position and
equity ratio at the same time. As Warimpex does not
recognize any increases in market values of the properties in their balance sheet, the company still has more
than Euro 80m in hidden reserves (including InterCont).
Therefore, this transaction may also re-attract investors’
interest in the share, which is still trading at a massive
discount to NNNAV of more than 70%.
Given the sound operating figures in 1H (EBITDA
+18%) and the very lucrative InterContinental-deal,
we keep our P&L-forecasts for 2012 and confirm our
Buy rating and our Target Price of Euro 2.50.
05 | Nov | 2012
Warimpex Finanz- und Beteiligungs AG
SWOT – Analysis
Strengths
•
•
•
•
Weaknesses
Opportunities
•
Significantly better regional diversification was not reached so far, due to the
weak transaction market and the focus on running developments. Regarding
the high correlation between the different eastern European markets, and
the large exposure of the company here, the development of the share is still
linked significantly to CEE’s economic growth.
•
The 50% share in the budget hotel JV was sold to the partner Starwood
Capital. In short-term it disburdened balance and cash flow, but in the midterm it erodes the desired diversification in terms of hotel categories.
•
Relatively low amount of free capital (until receiving the proceeds from the
InterCont-deal) to exploit market opportunities at the moment to expand the
hotel portfolio. On the other hand, after the completion of the St. Petersburg
Airport Hotel, Warimpex does not have a huge cash demand from its development pipeline anymore.
•
Equity ratio as of 1H 2012 is still very low at about 20%. With regards to the
slightly more volatile CEE markets the group is operating in, investors would
like to see a significantly higher figure here. However, shareholders’ equity
may be understated compared to peers as there are hidden reserves.
•
The sentiment within the transaction market for CEE real estate is still challenging, but both demand for high quality properties, e.g. core properties in
Warsaw, is strong again and local financing opportunities have improved.
Significant upside potential taking the current discount to NNNAV (Euro 3.20
per share as of 30 June 2012) of about 70% into account.
Given the good operating numbers (hike in revenues, swing in cash flow
from operations and net profit), the current discount offers the chance to enter a profitable equity story at a very large discount at the moment.
All new hotels opened in the last 24 months have started out excellently regarding occupancy and cash flow contribution. The overall stake-adjusted
room number is now at almost 3,500. GOP profits per average room in all
markets continued to grow, lifting the chance to sell objects successfully.
•
•
•
Threats
Established player in the European hotel and real estate markets with local
expertise and network.
Improving revenues from hotel business in 2011 and 1H 2012 (+18%), despite a shaky overall economy in most European countries. Rising occupancy rates with stable or even rising room rates allowed for a significant swing
in net result after minorities from Euro -3.2m (1H 2011) to +0.6m (1H 2012).
Managed by the two founders Dr. Franz Jurkowitsch and Georg Folian who
still own a majority stake in the company and are able to add value through
continuity and a very comprehensive network within the industry.
Successfully established two own hotel brands angelo and andel’s.
•
•
Investors’ sentiment is still clouded due to the ongoing financial turmoil. Both
the overall economic sentiment and the volatility of the hotel business remain
major challenges for the group.
Pressure to successfully close a major project sale within this year has increased, due to the weak transaction market in ‘11 and the fairly low liquidity
position and equity ratio without a profitable property disposal.
2
2 | SRC Equity Research
05 | Nov | 2012
Warimpex Finanz- und Beteiligungs AG
InterCont-Deal: Key Facts and its Implications on the Group
•
Property was developed by Warimpex and UBM from scratch.
•
First land plot acquired in 1997.
•
Building permit and management contract with InterContinental Group
closed in 2000.
•
Constructed from 2000-2003 by Porr and UBM and opened in 2003.
•
Since then, Warimpex and UBM each owned 50% in the hotel.
•
Agreement on the Head of Terms with the buyer announced in 2Q 2012.
•
Sale negotiations with a German open-ended real estate fund closed in 4Q
2012.
•
Transaction to be closed within 2012, confirming our SRCforecast of at least one major
sales transaction within fiscal
year 2012.
•
Sale price of more than Euro
100m will boost both the liquidity position and the equity
ratio of the group as the
transaction price is significantly above book value.
•
This transaction will help to
regain investors’ attention for
the share and in particular
underline the profit potential
from the Euro 84m hidden reserves in the balance sheet at
the moment.
•
Equity ratio is only at 19% as of 30 June 2012, based on the book values of
the properties. When adjusting to current market values assessed by CBRE,
equity ratio is at more than 32% already.
•
Moreover, Warimpex will be able to further benefit from the sound performance of the landmark hotel via owning the operating company together
with UBM. This operating company (Pachtgesellschaft) will pay a fixed fee to
the new owner, the open-ended German real estate Fund, allowing for a
fixed return for the fund investors. The operating company will further pay a
fixed management fee to Intercontinental Group. Hence, future outperformance of the hotel will generate revenues for Warimpex.
3
3 | SRC Equity Research
05 | Nov | 2012
Warimpex Finanz- und Beteiligungs AG
Hidden reserves of the Warimpex portfolio (Including InterCont Warsaw)
(Euro m)
620
The hidden reserves resulting from the differences in book values
and the market values
assessed by an external
appraiser are huge.
612
600
580
Hidden reserves alone
exceed the current market cap (~ Euro 50m) by
more than Euro 30m.
560
84.2m
hidden reserves
540
527.8
520
500
Gross Asset Value*
Book Value
Source: Compa ny Pres enta tion Augus t 2012, *CBRE Va l ua ti on a s of 30 June 2012
Strong and sustainable
recovery of the hotel markets since the crisisshaken year 2009.
Net Operating Profit from Hotels
(Euro m)
33.3
34
Since then, Warimpex increased NOP from the
running hotel business by
about 25% each year.
29
24
26.2
22.8
21.8
20.9
17.1
19
14
2007
2008
2009
2010
2011
2012e*
Source: Company reports 2008 - 1H 2012 *based on 1H 2012 y-o-y change
With a total of about 3,500
rooms in 20 hotels located
in 6 countries, Warimpex
is sufficiently diversified
in terms of category and
location.
Rooms
(stake adjusted as of
30 June 2012)
1,400
1,200
207
1,000
196
As one of the largest hotel
developers and operators,
the group benefits from
economies of scale and an
extensive network in the
industry.
800
600
400
730
825
200
397
220
274
352
0
Czech
Republic
Poland
Source: Company presentation August 2012
4 | SRC Equity Research
France
3-star
Germany
4-star
89
177
Russia
Romania
5-star
4
05 | Nov | 2012
Warimpex Finanz- und Beteiligungs AG
Warimpex AG
IFRS 31/12 (Euro '000)
CAGR
'11 - '14e
2009
2010
2011
2012e
2013e
2014e
Revenues
thereof “Hotels & Resorts” segment
thereof “Development & Asset Management”
50,698
46,410
4,288
58,389
52,950
5,439
64,925
58,613
6,312
73,090
65,200
7,890
72,410
66,800
5,610
74,750
69,100
5,650
Net gains from the sale of Group subsidiaries
thereof revenues from property sales
thereof carrying amounts, loans and borrowings
assumed by the purchaser
3,910
34,738
8,757
20,080
3,019
12,253
19,980
39,500
7,500
15,750
8,250
19,750
-30,828
-11,323
-9,234
-19,520
-8,250
-11,500
1,881
-1,011
1,007
0
0
0
1,264
617
-1,314
303
0
1,007
0
0
0
0
0
0
56,489
66,135
68,951
93,070
79,910
83,000
Expenses for materials and services received
material expenses ratio
Expenses for project development
Personnel expenses
personnel expenses ratio
Depreciation and amortization / including revaluation
thereof reversal of impairment write-downs
Other expenses
Impairment of goodwill
-23,079
-45.5%
-1,147
-17,378
34.3%
-59,835
0
-11,235
-1430
-26,557
-45.5%
-105
-18,628
31.9%
1,732
15,735
-7,912
0
-26,992
-41.6%
-3,001
-18,756
28.9%
-2,829
12,862
-7,710
0
-27,802
-38.0%
-3,130
-19,840
27.1%
-5,810
8,150
-7,310
0
-30,026
-41.5%
-980
-20,435
28.2%
-9,250
2,250
-7,700
0
-32,428
-43.4%
-1,049
-21,048
28.2%
-10,200
0
-7,750
0
Operating profit (EBIT)
-57,615
14,665
9,663
29,178
11,519
10,525
2.9%
Financial revenues
Financial expenses
Result from associated companies
Pre-tax profit (EBT)
Income tax
Deferred income tax
Net profit before minorities
attributable to:
Equity holders of the parent (after minorities)
Minoritiy interests
number of shares (on average)
Earnings per share
1,802
-18,441
-18,807
-93,061
-1,031
132
-93,960
591
-19,210
916
-3,038
-246
1,249
-2,035
3,873
-18,894
12,435
7,077
-325
488
7,240
2,150
-17,850
12,050
25,528
-610
350
25,268
2,301
-18,500
12,000
7,319
-550
300
7,069
2,462
-18,300
12,500
7,187
-520
250
6,917
-1.5%
-87,812
-6,148
36,604
-2.40
0.00
3.35
-528
-1,507
48,765
-0.01
0.00
3.10
6,478
762
54,000
0.12
0.00
3.20
24,748
520
54,000
0.46
0.00
3.54
6,319
750
54,000
0.12
0.08
3.67
6,767
150
54,000
0.13
0.10
4.05
Other income and expenses
thereof changes in real estate projects under
development or construction
thereof other income
Total revenues
Dividends per share (Euro)
NNNAV per share (Euro)
4.8%
5.6%
6.4%
1.5%
5
5 | SRC Equity Research
05 | Nov | 2012
Warimpex Finanz- und Beteiligungs AG
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:
[email protected]
[email protected]
Internet:
www.src-research.de
Rating Chronicle
Warimpex
Warimpex
Warimpex
Warimpex
Date
31 August 2012
25 May 2012
12 April 2012
5 December 2011
former
Rating share price
Buy
Buy
Buy
Buy
0.72 €
0.90 €
1.05 €
0.92 €
former
target
2.50 €
2.50 €
2.50 €
3.00 €
Please note:
The Warimpex share price mentioned in this report is the closing price of
2 November 2012. Warimpex mandated SRC Research for mentoring the
Warimpex share.
Disclaimer © 2012: 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.
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6 | SRC Equity Research