A flying start to 2019 offers room for surprise as management’s guidance of an improvement in full-year PBT (€2.9m+) has already been secured in Q1 (€3.4m). The c €10m sale of a residential and commercial complex reiterated the success of RCM Beteiligungs’ asset development record and its focus on selected well-defined projects. Favourable macro factors and scope for efficiencies and asset appreciation support RCM’s positive outlook, evident in maintaining a dividend, raised by 50% last year. Solid finances (6x 2018 interest cover and an above industry-average equity ratio of 46%), boosted by Q1 disposal proceeds, allow significant reinvestment as well as further share buybacks (0.55m in May for €1m after 2018’s 0.7m capital reduction).
After 2018’s bumper start, H2’s absence of meaningful property disposals and sharply lower rental income as a result of asset sales led to a slight profit ‘miss’ (PBT €2.9m against €3m+ guidance). This reduction in rental volume may be regarded as temporary, ie dictated by the lure of high disposal prices, as RCM remains intent on growing recurrent revenues. Moreover, the transaction impact was again mitigated by enhanced rent per square metre (14% for the year) and much lower rental admin costs (down by half in H2). Although not disclosed for H2, the annual asset sale margin was 33%, which is well ahead of 2016 (20%+), if not a strong 2017 (40%). Corporate restructuring yielded expected tax efficiencies and thus a disproportionate rise in net profit (2018 up 62% vs PBT up 37%).
FY19 has followed the pattern of last year with the inclusion of an unusually large disposal (a well-invested 8.900sqm development for c €10m), which was reported late last year but recognised in Q1. However, the transaction was even more profitable (would increase 2018 asset sale margin from 33% to 49%). Despite Q1 exceeding targeted full-year PBT (€3.4m vs €2.9m+), guidance is unchanged as any gain on last year will depend on transactions.
The 2018 P/E of under 12x is undemanding and likely to reduce visibly, given the strong Q1 performance, positive guidance and continued share buybacks. A P/BV (2018) ratio of 1.3x is also unchallenging as it compares with the book value of assets (RCM reports under HGB standards).