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Research: Investment Companies
Heliad’s H120 results largely reflect the strong share price performance of its main holding, the online broker flatex, which was up 91% in H120. Heliad executed a profitable partial exit from flatex post period end, generating gross cash proceeds of c €21.5m. Meanwhile, management continues to reposition its portfolio, with further reduction of its exposure to listed holdings in 2020 to date.
Heliad Equity Partners |
Largest portfolio holding delivers
Investment companies |
Scale research report - Update
1 September 2020 |
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Heliad’s H120 results largely reflect the strong share price performance of its main holding, the online broker flatex, which was up 91% in H120. Heliad executed a profitable partial exit from flatex post period end, generating gross cash proceeds of c €21.5m. Meanwhile, management continues to reposition its portfolio, with further reduction of its exposure to listed holdings in 2020 to date.
H120 results driven by largest holding
Heliad’s net income increased to €32.4m in H120 from €0.4m a year earlier, assisted by a c €40.6m gain from revaluation, largely driven by the 91% share price appreciation of flatex during this period. This compensated for write-downs on listed and unlisted holdings of c €6.7m in H120. NAV per share reached €10.74, visibly up vs €7.39 at end December 2019, driven again by a revaluation of its stake in flatex.
Partial exit from flatex with a notable uplift
On 2 July 2020, Heliad announced that it had sold 0.5m shares in flatex as part of a private placement to institutional investors, translating into proceeds of c €21.5m for the company. This implies a disposal price of around €43 per share (vs flatex’s closing price of €45.65 on the day before the announcement), which we estimate represents a notable uplift to the average cost of acquisition of €7.3 per share. As part of the transaction, Heliad agreed to a 90-day lock-up on its remaining 7.3% stake in flatex.
Valuation: Trading at a considerable discount to NAV
Following a c 73% share price increase between end FY19 and 27 August 2020, Heliad still trades at a 33% discount to its last reported NAV of €10.74 per share. We estimate that the discount to NAV narrows to c 23% after adjusting Heliad’s NAV for changes in flatex’s share price performance since June 2020 (down 14%), cash generated from the partial exit from flatex (not adjusted for transaction fees) and a performance fee that the deal alone would trigger (c €3.6m according to our estimates).
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Historical financials
Source: Heliad Equity Partners. Note: P/NAV based on current share price. |
Edison Investment Research provides qualitative research coverage on companies in the Deutsche Börse Scale segment in accordance with section 36 subsection 3 of the General Terms and Conditions of Deutsche Börse AG for the Regulated Unofficial Market (Freiverkehr) on Frankfurter Wertpapierbörse (as of 1 March 2017). Two to three research reports will be produced per year. Research reports do not contain Edison analyst financial forecasts.
flatex performance supports H120 results
Heliad’s net income reached a notable €32.4m in H120, compared with just €0.4m a year earlier. This was supported by a €40.6m gain from revaluation (vs €4.9m in H119), largely driven by the 91% share price appreciation of flatex, Heliad’s largest investment, which represented c 83% of its NAV at end H120. These write-ups more than offset a €5.9m write-down on unlisted investments (Tiani Spirit based on our conversation with management) and a €0.7m write-down on listed stocks, with the latter mainly affected by the c 25% share price decline of MagForce during the period. In H120, Heliad recorded a net disposal gain of €0.3m after it sold all its shares in the listed Sleepz, reduced its exposure to the listed MagForce and Elumeo and disposed of its stake in the non-listed holding AlphaPet (see our previous update note for more details). Heliad’s NAV was €106m at end-June 2020, which translated into a NAV per share of €10.74, up from €7.39 at end December 2019, largely driven by flatex’s share price appreciation in the period. At end June 2020, Heliad’s listed investments (ie stocks) were valued at €90.2m (representing c 85% of its NAV), the value of its unlisted holdings was €11.6m (11%) and cash stood at €3.3m (3%).
Exhibit 1: H120 results highlights
€000s, unless otherwise stated |
H120 |
H119 |
y-o-y change |
Income from the sale of financial assets |
4,676 |
5,109 |
(8.5%) |
Other operating income |
13 |
- |
N/M |
Gains from revaluation |
40,565 |
4,908 |
N/M |
Retirement of financial assets |
(4,399) |
(5,275) |
(16.6%) |
Amortisation of intangible assets |
- |
(2) |
N/M |
Gains from investments and securities |
- |
11 |
N/M |
Expenses from the fair value assessment |
(6,744) |
(3,270) |
N/M |
Financial revenue |
180 |
354 |
(49.2%) |
Financial expenses |
- |
(7) |
(100.0%) |
Other operating expenses |
(1,281) |
(1,391) |
(7.9%) |
Pre-tax profit |
33,009 |
438 |
N/M |
Income taxes |
(660) |
(52) |
N/M |
Net result for the period |
32,350 |
386 |
N/M |
Average number of shares (diluted) |
9,873 |
9,873 |
0.0% |
EPS (diluted, €) |
3.28 |
0.04 |
N/M |
Source: Heliad Equity Partners
Notably, Heliad sold part of its stake in flatex post-period end, which we describe in more detail above. We note that in line with IFRS accounting treatment, Heliad will likely record a small loss from the transaction because the value uplift is already taken into account through flatex’s share price appreciation in H120 and the disposal price of c €43 per share was slightly below the closing price of €45.75 at the reporting date. By contrast, in HGB accounts it will post a significant gain (c €17.9m, according to our estimates) as share price appreciation is not reflected in the H120 profit. We also note that the deal may trigger a performance fee of c €3.6m (ie 20% of realised net earnings).
Repositioning away from listed holdings continues
The recent disposals are in line with Heliad’s strategic refocus on non-listed holdings. Its portfolio currently includes stakes in listed flatex, MagForce and Elumeo and five non-listed companies: Springlane (a retailer of kitchenware), Spaze (a technology-based platform for influencer marketing), Libify (a specialist in manufacturing and sales of mobile emergency calls, locating, and tracking systems), Muume (a platform for digital services for daily consumption and purchasing processes on smartphones) and Tiani Spirit (a specialist in standardised and secure exchange of data, and of healthcare information in particular). Management highlights that its focus is on maximising the value of the existing portfolio while exploring opportunistic investments across different industries, with a potentially stronger emphasis on the fintech, IT security, blockchain and digital brand sectors. Having said that, no new investments were conducted in H120, nor has the company provided any details on the future deployment of the cash proceeds from its partial exit from flatex yet. We note that Heliad may use these funds for investments or distribute them in the form of dividends.
flatex remains the largest portfolio holding and Heliad’s 7.3% stake in the company was valued at c €56.3m on 27 August 2020, according to our estimates. flatex’s shares have declined by c 14% since end-June 2020 following a c 91% share price appreciation between end December 2019 and end June 2020. flatex released its preliminary H120 figures in July 2020, posting 55% y-o-y growth in sales to €100m and EBITDA of €43m, up 116% y-o-y. It also completed the acquisition of a 100% stake in DEGIRO in July 2020 and expects to uplist to the SDAX in Q420.
Valuation
Heliad assesses its own NAV per share based on the valuation of listed and unlisted holdings. Its shares currently trade at a 33% discount to its last published NAV of €10.74 as of end June 2020. Although it further reduced its exposure to listed stocks (Sleepz, MagForce, Elumeo) in H120 and executed a major partial exit from flatex in July 2020, its discount to the recently published quarterly NAV to a significant extent reflects movements in the valuation of flatex (we understand that MagForce and Elumeo represented less than 2% of Heliad’s NAV as of end H120).
We estimate that Heliad’s 7.3% stake in flatex was valued at c €56.3m at 27 August 2020 (vs c €88.3m at end June 2020 when it had a 9.9% stake in the company). If we assume that Heliad received c €21.5m in cash from the partial exit from flatex (although the actual net proceeds were likely lower due to the payment of transaction fees), the price movements of other listed stocks have a negligible impact on its NAV and all other things remain unchanged vs end June 2020, we arrive at an underlying discount to Heliad’s last reported NAV of c 26%. The discount to NAV might partially reflect the portfolio transformation (which is still early stage) to unlisted holdings, which are inherently less transparent and have lower liquidity than listed companies.
We believe that investors may also discount the performance fee that Heliad is likely to pay to its investment manager, Heliad Management, based on the FY20 results. We estimate that the partial exit from flatex alone implies a performance fee of c €3.6m (or c €0.36 per share) for the manager. However, when we take this into account in our NAV adjustments, Heliad’s discount to last reported NAV narrows only slightly to c 23%.
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Exhibit 2: Heliad’s NAV and share price performance |
Exhibit 3: Heliad’s discount to NAV |
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Source: Heliad Equity Partners |
Source: Heliad Equity Partners, Edison Investment Research |
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Exhibit 2: Heliad’s NAV and share price performance |
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Source: Heliad Equity Partners |
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Exhibit 3: Heliad’s discount to NAV |
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Source: Heliad Equity Partners, Edison Investment Research |
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Research: Real Estate
S Immo’s portfolio saw a varying degree of impact from the COVID-19 crisis in H120, with hotel operations facing the greatest headwinds alongside retail properties. Conversely, residential and office properties remained largely unaffected and were even subject to positive revaluations of €19.5m and €12.0m vs end 2019, respectively. S Immo’s balance sheet remains robust with a moderate net LTV of 44.6% and a cash position of c €224m at end June 2020 (albeit already partially deployed post the balance sheet date). It continues to search for compelling investment opportunities in the residential and office segments.