Last close As at 05/08/2026
EUR21.35
▲ 0.05 (0.23%)
Market capitalisation
EUR376m
Research: Investment Companies
Deutsche Beteiligungs (DBAG) is a well-established private equity company investing primarily in mid-sized German companies. On top of achieving a return on its direct investments, it generates fee income from managing c €1.4bn in third-party funds. This year, DBAG has been steadily deploying its investment commitments, with DBAG Fund VII expected to complete its investment phase soon. The subsequent launch of its successor should drive fee income (as it is based on committed capital). Meanwhile, DBAG’s portfolio is affected by weaker economic and trading conditions in some industrial sectors. In this context, it is encouraging that DBAG continues diversifying its portfolio and performing successful exits.
Deutsche Beteiligungs |
A play on the German mid-market MBO space
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Private equity |
5 November 2019 |
Share price/discount performance
Three-year performance vs index
Share details
Business description
Analyst
Deutsche Beteiligungs is a client of Edison Investment Research Limited |
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Deutsche Beteiligungs (DBAG) is a well-established private equity company investing primarily in mid-sized German companies. On top of achieving a return on its direct investments, it generates fee income from managing c €1.4bn in third-party funds. This year, DBAG has been steadily deploying its investment commitments, with DBAG Fund VII expected to complete its investment phase soon. The subsequent launch of its successor should drive fee income (as it is based on committed capital). Meanwhile, DBAG’s portfolio is affected by weaker economic and trading conditions in some industrial sectors. In this context, it is encouraging that DBAG continues diversifying its portfolio and performing successful exits.
Proceeding with sector diversification
DBAG recently made good progress in broadening its sector exposure. During 9M19 (ending June 2019), it completed five new additions to its portfolio (including two in the TMT sector and one in healthcare), deploying €77.1m including follow-on investments. A further eight acquisitions were performed by portfolio companies. Post the reporting date, DBAG ECF acquired a majority position in the fibre optic full-service provider STG (with up to €14m invested by DBAG alone) and DBAG Fund VII acquired Cartonplast (with DBAG’s co-investment at €26m). On deal closure, DBAG Fund VII will already have allocated 71% of its investment commitments of €808m and we believe the next fund could be launched in 2020.
Unexpected boost to FY19 results
In July, management lowered its guidance due to worsening economic conditions (most notably in the automotive and wind energy sectors), expecting net income to be at least positive in FY19. We appreciate that in the more challenging environment, DBAG was able to realise five successful exits in FY19, which contributed over €40m to its net income. A total uplift of €14.3m was recognised in 9M19, while the realization of Inexio will translate into a c €30m uplift (not reflected in the above guidance) and will assist Q419 results.
Valuation: Premium to NAV at c 26%
Source: Refinitiv. Note: Discrete rolling 12-month total return performance in euros up to last reported NAV. *11-month period due to change in financial year end. |
DBAG’s shares continue to trade at a premium to NAV, which in our view comes from the market-implied value of the fund services business. The premium to end-June NAV stands at c 26% vs 10–30% over the previous 12 months, implying an LTM earnings multiple of the fund services business at c 46x (if we assume a discount to the broader market represented by the LPX Europe Index). DBAG’s shares offer a dividend yield of c 4% vs the peer average of c 3%.
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Research: Industrials
paragon faces a challenging year, primarily due to growing pains at the Electromobility segment (Voltabox). The Automotive segments’ FY19 sales are guided to be c €130m, near the top of the previous range. Group sales growth continues, albeit slower than expected, with margins reduced by an under-recovery of overheads and rationalisation and integration costs. FY19 guidance was greatly reduced in August. The order backlog of €2.1bn supports stronger growth in FY20, alongside improved profitability due to operational leverage and restructuring benefits in Mechanics. The current rating reflects concerns over the growth strategy following recent events. Restoring investor confidence should be a key management focus.