Stable NAV per share sequentially

By announcing that it could make disposals to deleverage its balance sheet by €13bn vs. the c.€100bn GAV, Vonovia has effectively flagged a further reduction in debt.

In a much more defensive mood in Q1 22

In FY 22, Vonovia will sell c.€0.9bn of newbuilt apartments rather than renting them. This will help to lighten its balance sheet but it questions Vonovia’s own expectations, in our view.

€8bn cash capital increase on track

Guidance was broadly unchanged. Capital increase is scheduled for the end of November 2021. Vonovia will raise c.€8bn. Details of it are unavailable yet.

Waiving the minimum acceptance threshold: a defensive move

Having secured 40% of the target’s shares, Vonovia wasn’t comfortable with the 50% threshold. The latter was removed last night. The company will extend the acceptance period.

Disposals pushed both EBITDA higher, but nice organic figures too

Top-line guidance was stable. EBITDA guidance was raised thanks to increasing disposals awaited in FY 21 (2,800 units vs. an initial guidance of 2,500). Whereas rents were up 3% lfl, values were up c.14% at an annual pace (H1 21).

Merging with Deutsche Wohnen

An unexpected friendly takeover bid will lead to the creation of the indisputable residential landlord in Europe. Vonovia will pay twice the price offered in 2015-16. The tender offer should close in August 2021.

Slowing yield compression in the biggest cities

Q1 21 was strictly in line with the H2 20 set of figures with lfl growth standing at 3.0%. It was 4.0% in H1 19. We stick to our negative stance. Vonovia pointed to the “very challenging picture” in Berlin. A new “Mietspiegel” will emerge soon there: indexation will therefore be low in FY 21.

Once again: positive revaluation outlook in FY 21

Vonovia reached the lower side of its lfl growth guidance in FY 20. It was nevertheless bullish when considering the FY 21 outlook. Q4 20 was hurt by a “one-off” in the city of Berlin but rents did not slow outside Berlin.

Good Q3 20 overall. But slowing lfl growth.

Vonovia released a decent set of Q3 20 figures with a further good performance expected for H2 20 as far as book values are concerned. The make-up of its guidance has changed a bit due to the lower contribution from lfl growth. Nothing really material to date and the big picture doesn’t change. Both the figures and the company’s safe haven status look secure until February 2021. The consequences of the second lockdown on German housing and consumer confidence will however need to be revisited du

A lower than c. 3% cost of equity...really?

The €1bn capital increase will replace the €1bn hybrid capital. We believe that, like other companies, Vonovia is seizing the opportunity of its record high share price. This move underlines just how expensive the shares can be considered to be. By Vonovia too?

Buoyant German housing values in H1 20

Values were up 11% in H1 20 at an annual growth pace (i.e. 5.3% for just H1 20 vs. December 2019). The range was 3% in the city of Berlin to 19% in other areas (Southern Ruhr, Kiel, Bremen). i.e. the cheapest destinations (<€1,600 per sqm in December 2019).

Robust short-term outlook, Reduce confirmed

Vonovia reduced its FY 20 guidance slightly in Q1 20, due to the Coronavirus. Nevertheless, we believe that reducing macro-inflation in 2020-22 should end up percolating into Vonovia’s performance. We question the sustainability of lfl growth in 2021-25, which is the heart of further massive revaluations. The latter only can justify a growing share price in the future. German Residential will stay the perfect safe-haven it is in FY 20. What about 2021-22?

Lfl growth peaked in 2018

Up to now, we had anticipated a cycle coming progressively to its end in 2022-23 for Residential in Germany. Coronavirus is now revealed as a catalyst, provoking a crisis earlier than we expected previously. We now believe that the NAV will progressively stabilise or decrease as from 2020. However, we hope that Vonovia will stay the “relative” safe-haven it is vs. peers. The tragic consequences of growing unemployment in the future, coupled with deflation, could weigh on the topline’s consensus.

Further revaluations to come in H2 19

The pace of organic growth was stable in Q3 19 at c. 4.0%. Vonovia announced it will probably increase the valuation of its portfolio by another €1.6-2.3bn in H2 19 (excluding capex) vs. €2.2bn in H1 19 or c. 7% in FY 19.

The City of Berlin's assets were up 9% in H1 19

The NAV increased by 8% on its December 2018 level, net of dividend, driven by an overall increase in prices per sqm. The revaluation pace again accelerated on the back of: i/ 4% lfl growth; ii/ another yield compression of 20bp from 3.4% to 3.2% (€1.4bn of the full €2.5bn revaluations in H1 19). Despite this move, until now Vonovia has been reluctant to close the gap between its book values and higher end-market prices per sqm.

So far so good

The group posted a strong set of results showing faster and stronger-than-expected net interest margin expansion and no signs of a deterioration and above all anxiety on the asset quality front. It remains to be seen if the UK government will allow banks to hold on to the benefit of interest rate increases and if the UK economy proves as resilient as expected.

Sustainably robust results which we expect to trigger distributions

Legal & General disclosed strong HY 22 results, albeit in line with the consensus’ expectations. With most of the metrics improving on a yoy and sequential basis, we believe that the strong solvency position, in an environment with (sustainable?) higher yields, should trigger capital distributions to shareholders at the year-end.

And another layer of distributions

Aviva unveiled a fair operating result. While, in line with the insurance industry, Aviva saw a strongly negative impact from financial assets revaluation, the solvency position improved materially, yielding additional capital distributions. Once distributions cease, we believe that Aviva could be a takeover target.

Review of Electricity Market Arrangements - REMA Could Bring Benefits

Last week, the UK government published the consultation paper on its Review of Electricity Market Arrangements (REMA). Any change potentially represents uncertainty in a market that has been wary of changes with a number of shares falling after early details of possible reforms were flagged in the press. We review the possible changes and conclude that while there is some risk, from what we can see at present the likely outcomes could be either minimal or beneficial for investors in clean energy

SHORE CAPITAL - H&T Group (HAT) - House stock at 411p

Cenkos:Duke Royalty Ltd -Record revenues keep on rolling

Cenkos:Duke Royalty Ltd -Record revenues keep on rolling

Hybridan Small Cap Feast 09/08/22

Dish of the day Joiners: No joiners today. Leavers: No leavers today. What’s cooking in the IPO kitchen?** Unigel Group, intends to join the Aquis Growth Market. Unigel Group is a pioneer in the field of thixotropic gels for the fibre optic cable industry. The Company is also a supplier of laminated steel tapes to the fibre optic cable industry in the US. Thixotropic gels and laminated steel tapes are essential components to the rapidly growing global fibre optic cable market. The Group exports

H&T Group (HAT) - House Stock, 411p - Golden oldy … celebrating 125 years

Hybridan Small Cap Feast 21-07-2022

Dish of the day Joiners: No joiners today. Leavers: No leavers today. What’s cooking in the IPO kitchen? Unigel Group, intends to join the Aquis Growth Market. Unigel Group is a pioneer in the field of thixotropic gels for the fibre optic cable industry. The Company is also a supplier of laminated steel tapes to the fibre optic cable industry in the US. Thixotropic gels and laminated steel tapes are essential components to the rapidly growing global fibre optic cable market. The Group export

Robust AUMs in a challenging environment

Great results posted by M&G, which recorded very resilient AUMs. The firm managed to outperform the consensus despite the tough environment. While the management avoided any capital plans comments, the resilient solvency position leaves great prospects while the current share buyback is still far from being completed.

Morning Note – 1 August 2022

Hybridan Small Cap Feast 16/08/22

Joiners: No joiners today. Leavers: No leavers today. What’s cooking in the IPO kitchen?** Unigel Group, intends to join the Aquis Growth Market. Unigel Group is a pioneer in the field of thixotropic gels for the fibre optic cable industry. The Company is also a supplier of laminated steel tapes to the fibre optic cable industry in the US. Thixotropic gels and laminated steel tapes are essential components to the rapidly growing global fibre optic cable market. The Group exports to over 40 count

8AM Acquisition Completed – 2-4% EBITDA Upgrades

Tatton Asset Management has announced the completion of a 50% stake in 8AM, following regulatory approval. We update our model on the back of this, reflecting the positive financial impact of the investment. We see 2-4% EBITDA upgrades over the forecast period and 1-3% EPS upgrades, as the operating profit contribution more than offsets the higher sharecount as part of the share consideration. 8AM will provide TAM’s clients with access to an extended range of risk profiled investments, underpinn

LIBERUM: Alternatives Daily: CSH | RECI

LIBERUM: Real Estate Investors* - Further profitable sales set to drive capital return strategy