RCM Beteiligungs continues to please with H119 PBT of €4.1m comfortably exceeding management’s guidance of an improvement in full-year PBT (€2.9m+). Although the driver may have been a bumper c €10m disposal in Q1, the second quarter also saw a y-o-y step-change in PBT, boosted by markedly lower finance costs thanks to interim reinvestment of asset sale proceeds. Even if 2019 guidance has not been updated, favourable macro factors and scope for efficiencies and asset development support RCM’s positive outlook, as does its commitment to re-build its portfolio (both commercial and residential), as confirmed by two recent deals of size.
The half to June followed the pattern of its y-o-y comparative with a flying start reflecting an unusually large disposal (a well-invested 8,900 sqm development for c €10m), which was reported late last year but recognised in Q1. The transaction was also particularly profitable (would increase 2018 asset sale margin from 33% to 49%). Q2 was predictably quieter than Q1 but again driven by property disposals, so revenue and PBT were well ahead of Q218. Significantly, a halving of rental income owing to rationalisation was made good by lower finance costs (c €0.5m gain in H1) as sale proceeds (properties cut from 47 to 19 in 2017 and 2018) were reinvested, notably in high-yielding bonds. The impact was further curbed by efficiencies (rental admin costs down by a third) and enhanced unit returns.
Even without elaboration of March guidance H119 looks to have assured a 2019 profit ‘beat’ by clearly exceeding management’s full-year target (PBT €4.1m vs €2.9m+). Moreover, the company is confident about the rest of the year, given market conditions and increasing benefits from restructuring its portfolio, eg fewer locations, a focus on its Dresden core and higher average unit size. Longer-term growth is being secured by active portfolio expansion, eg in Q2 two properties amounting to c 6,500 sqm, which increases the estate by over a third.
2018 P/E of under 12x is undemanding and likely to reduce visibly in FY19 given a strong H1 performance, positive guidance and continued share buybacks. A 1.3x 2018 P/BV ratio is also unchallenging as it compares with the book value, which does not take into account hidden reserves (RCM reports under HGB standards).