Noratis — New capital to fuel portfolio growth

Noratis (DB: NUVA)

Last close As at 18/06/2024


0.05 (0.25%)

Market capitalisation


More on this equity

Research: Real Estate

Noratis — New capital to fuel portfolio growth

After a year of limited asset disposals following the announcement of Noratis’s decision in March 2020 to focus on net portfolio expansion, management expects a significant rise in property sales in FY21 and guides to much higher EBIT and PBT compared to FY20. Meanwhile, the company plans to further grow its portfolio, which it will support with c €22m raised through equity issues in FY20, a €30m corporate bond placed in the period and long-term funding from its anchor shareholder, Merz, which in March 2020 agreed to inject up to €50m in Noratis until the end of 2024.

Milosz Papst

Written by

Milosz Papst

Director, Financials

Real Estate


New capital to fuel portfolio growth

Real estate

Scale research report - Update

21 May 2021



Market cap


Share price graph

Share details




Deutsche Börse Scale

Shares in issue


Last reported net debt at end-FY20


Business description

Noratis is a specialised asset developer, acquiring residential rental income-producing assets in secondary locations with optimisation potential. Investing in the asset base and improving the tenant mix creates value, which it exploits in well-structured asset sales through individual or block sales.


Management guidance assumes higher EBIT and PBT in 2021.

Portfolio expansion may bring greater stability to sales and earnings.

Strong experience operating in Germany’s non-core areas.


Small company in a very competitive market.

Dependence on attractive portfolio opportunities.

Relatively high leverage (LTV at c 67% at end-FY20).


Milosz Papst

+44 (0) 20 3077 5700

Anna Dziadkowiec

+44 (0) 20 3077 5700

After a year of limited asset disposals following the announcement of Noratis’s decision in March 2020 to focus on net portfolio expansion, management expects a significant rise in property sales in FY21 and guides to much higher EBIT and PBT compared to FY20. Meanwhile, the company plans to further grow its portfolio, which it will support with c €22m raised through equity issues in FY20, a €30m corporate bond placed in the period and long-term funding from its anchor shareholder, Merz, which in March 2020 agreed to inject up to €50m in Noratis until the end of 2024.

FY20 earnings down, NAVPS up 16% y-o-y

Noratis posted a 48% y-o-y drop in EBIT to €8.2m and a 64% y-o-y fall in PBT to €4.2m in FY20, largely due to lower asset disposals (€12.0m in FY20 versus €63.0m in FY19). At the same time, a c 40% increase in the number of portfolio units to over 3k at end-FY20 led to a 29% y-o-y rise in rental revenues to €16.7m in FY20. The €375m market value of Noratis’s properties (calculated by an external appraiser) at end-FY20 was 15% above their carrying value and consequently, its net asset value per share (NAVPS) increased by 16% y-o-y to €22.8 at end-FY20.

Growth plans supported by equity from Merz

Noratis plans to grow its portfolio further in FY21, aiming to become profitable from rental income alone in the future. That said, property sales will remain an integral part of its strategy and earnings driver over the longer term, according to management. Noratis’s net loan to value (LTV) of c 67% at end-FY20 (versus 64% at end-FY19 and the maximum level of 75% set by management) may look relatively high, but we believe that agreed funding from its anchor shareholder Merz should be supportive of its balance sheet and strategy (we estimate it may still invest up to c €36m equity in Noratis until the end of 2024, in line with the existing agreement). Moreover, Noratis’s business profile (acquiring properties with optimisation potential) may affect the LTV ratio amid the ongoing portfolio growth.

Valuation: Trading at a discount to NAVPS

While the company’s FY21e P/E of 16.3x is higher than that of its closest peers, Accentro (13.5x) and Peach Property (10.4x), based on consensus it falls to 9.5x in FY22e, slightly below peers. Notably, Noratis’s shares are trading at a c 11% discount to its NAVPS of €22.8 at end-FY20 compared to a 1% premium for Peach Property (data for Accentro not available). The company’s dividend yield for 2021 and 2022 (based on Refinitiv consensus) remains attractive compared to its peers.

Consensus estimates




































Source: Noratis, Refinitiv consensus at 21 May 2021

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.

FY20 results reflect postponement of asset sales

Noratis reported a significant decline in EBIT and PBT in FY20, in line with its guidance, which reflected the management decision announced in March 2020 to reduce asset disposals in the period and instead focus on portfolio expansion. As a result, total revenues fell to €28.7m in FY20 from €76.0m in FY19, with sales from asset disposals at a modest €12.0m, compared with €63.0m a year earlier. Noratis sold 86 units in FY20 (vs 339 in FY19), generating a margin on sales of 41% (23%).

At the same time, rental revenues increased 29% y-o-y to €16.7m, assisted by an improvement in rental margin (c 60% in FY20 versus c 55% in FY19) and, most notably, expansion of the portfolio from 2,407 units at end-FY19 to 3,366 units at end-FY20 (or 3,632 units including properties that have already been contractually secured, but not yet recognised at end-FY20). In the period, Noratis acquired 1,045 units (1,311 units), compared to 955 units in FY19, with new additions coming from regions where it has been present for some time (ie Rhine-Ruhr, Rhine-Main, Leipzig, the Hannover-Braunschweig-Göttingen-Wolfsburg metropolitan area and the greater Münster area), as well as new locations such as Emden and Cuxhaven in northern Germany and the Upper Palatinate in southern Germany. Post period end, Noratis announced the purchase of 150 flats in Gelsenkirchen in the North Rhine-Westphalia region.

Exhibit 1: Portfolio development

Source: Noratis accounts, Edison Investment Research. Note: *Includes only acquisitions already completed in FY20.

Portfolio expansion was coupled with an increase in headcount, with new recruitment taking place mostly in Q420 (hence the average number of employees of 53 in FY20 was only slightly above the 50 in FY19). This translated into a 23% y-o-y increase in personnel expenses to €5.0m in FY20. Management plans to further expand the team in 2021, depending on the acquisition pipeline and the resulting increase in inventories.

EBIT declined to €8.2m in FY20 from €15.8m in FY19, in line with management expectations for a significant y-o-y fall. Despite an increase in bank liabilities amid portfolio expansion (see more details below), net finance costs declined slightly to €4.1m in FY20 from €4.3m in FY19, supported by lower expenses for interest rate hedges (the latter stood at less than €0.1m in FY20 vs €0.8m in FY19). As a result, PBT was €4.2m in FY20 (vs €11.5m in FY19) and EPS declined to €0.69 (versus €2.29 in FY19). The company highlights that pandemic-related rent losses or risks from rent receivables were low and of minor importance for the course of business in the period. Based on our conversation with management, we understand that the vacancy rate increased to c 10% at end-FY20 from c 6% at end-FY19, but we believe it may be at least partially due to the ongoing portfolio expansion (vacancies tend to rise in the first months after a takeover) as well as the continuing optimisation of the existing portfolio (when flats are deliberately not re-let before disposals or where renovations have started).

Management recommended a dividend of €0.50 per share, which includes c 50% of FY20 profits (in line with the company’s dividend policy), with the remaining amount coming from the distribution reserve that it created last year due to the uncertainty posed by the COVID-19 pandemic. Noratis had a solid cash position of €31.0m at end-FY20 (versus €7.0m at end-FY19), but we understand that it will be used largely for property acquisitions.

It is noteworthy that Noratis switched to IFRS accounting standards in FY20 (from HGB previously), which it hopes will provide more transparency and comparability of figures with other real estate companies. Management highlights that this change had a limited impact on its results as its properties are still reflected in current assets and reported at cost (with no subsequent revaluations), as they are acquired with the aim of being sold after successful development.

Exhibit 2: Financial results

IFRS figures, €000s unless otherwise stated



y-o-y change

Total revenue




Revenue from sales of inventory properties




Costs of sales of inventory properties




Gross profit from sales




Letting revenue




Letting costs




Gross profit from letting




Other income




Gross profit




Personnel expenses




Depreciation and amortisation




Other operating costs and depreciation








Profit/loss of equity-accounted entities




Finance income




Finance costs








Income tax




Net income




Attributable to owners of the parent




Attributable to non-controlling interests




EPS (€)




Source: Noratis

Net debt reached c €257m in FY20 (versus c €177m at end-FY19) after liabilities to banks increased by c €79m to €257.9m at end-FY20 amid portfolio growth, and the company placed a €30m corporate bond (see more details below). Importantly, only c 1% (or c €3.6m) of its financial liabilities (ie the corporate bond, liabilities to banks and leasing) mature in the next 12 months, while the remaining exposure has a maturity of one to five years (75%) and over five years (24%).

The market value of Noratis’s properties (calculated by an independent external appraiser) was €375m at end-FY20, c 15% above their carrying value, which implies a net LTV of 67.1% at end-FY20 (versus 63.9% in FY19 and the maximum level of 75% assumed by management). The latter figure is relatively high, but the company has secured long-term equity funding from Merz, which we estimate may still invest up to €36m in Noratis until end-FY24 and would support Noratis’s balance sheet. We also note that Noratis buys properties with optimisation potential and aims to increase their value over time, which may result in a higher LTV ratio, in particular following a period of increased acquisition activity (such as recently). Its NAVPS, calculated with the real estate portfolio reflected at market value and equity adjusted for current income tax at 27.4%, increased c 16% year-on-year to €22.8 at end-FY20.

Capital and financing measures to support growth

The company’s prospective property acquisitions will be assisted by the financing measures it completed recently, as well as further equity funding from its long-term shareholder, Merz (whose stake in Noratis was c 49.1% at end-FY20), which agreed in March 2020 to invest up to €50m in the company until the end of FY24 (see more details in our May 2020 update note). Subsequently, Noratis completed a €5.0m capital increase with Merz at a price of €19.80 per share in May 2020 (these shares are not entitled to the dividend paid out from FY19 profits). It also raised €16.9m in a capital increase in September 2020 by issuing c 964k shares at €17.55 per share. Merz contributed c €9.1m to this amount by acquiring c 517k shares that were not subscribed to in a public offering and the subsequent private placement. Based on the above, we estimate that Merz may still invest c €36m in Noratis until the end of 2024.

On top of that, Noratis issued a €30.0m unsubordinated and unsecured corporate bond recently, including €12.5m placed in November 2020, and follow-ups of €10.0m and €7.5m in December 2020. The bond has a five-year maturity and an interest rate of 5.50% per annum, which implies an annual interest expense of c €1.7m, according to our estimates.

Management expects higher EBIT and EBT in 2021

For 2021, Noratis guides to significantly higher EBIT and EBT compared to the previous year, supported by an increase in revenues from asset disposals. It also reaffirmed its plans to become profitable from recurring rental income alone in the future, which should be assisted by continuing portfolio growth (when we subtract gross profit on sales from FY20 PBT, we arrive at a loss of €0.8m). Management highlights that asset disposals will remain an integral part of its strategy, even if it decides to transfer individual properties to a standing portfolio at some point in the future.

Trends in the broader real estate market remain supportive of Noratis’s business. Despite a relatively weak Q220 due to the COVID-19 outbreak, the German residential market posted a 12% y-o-y increase in transaction volumes to €19.7bn in 2020, the second highest amount of all time, according to Savills. Savills expects transaction volumes in 2021 to be above average again, potentially in line with 2020, highlighting the growing importance of residential properties during the pandemic, which could produce structural growth at a time when demand and valuation trends in the commercial property market are difficult to assess. In Q121, the ‘living’ sector (including residential, student housing, micro living and elderly care homes) further increased its share in overall transaction volumes to c 46% versus 31% in 2020 and 24% in 2019, which was mainly attributable to weakness in other market segments, according to Jones Lang LaSalle (JLL). Savills highlights that the pandemic might cause the workspace and residential markets increasingly to decouple geographically due the digitalisation of workspace. We believe this could create an opportunity for Noratis, which is focused on and has experience in acquiring and managing residential properties in German secondary locations.


Noratis’s position between asset holder and developer makes for a difficult comparison with listed companies. We believe that its closest peers are RCM Beteiligungs, a German property developer acquiring rental income-producing assets in and around Dresden and investing in refurbishment (for which no consensus are currently available), Accentro, a German residential property company focused on privatisation, and Peach Property Group, a company investing in high-yielding residential real estates, mainly in German secondary locations.

Based on Refinitiv consensus, Noratis is trading at an FY21e P/E of 16.3x (versus 13.5x for Accentro and 10.4x for Peach Property Group), with FY22e P/E declining to 9.5x (vs 10.5x and 9.7x, respectively). Noratis offers a healthy FY21e dividend yield of 3.1% (versus 1.8% for Accentro and 5.2% for Peach Property Group), which increases to 5.3% in FY22e (versus 2.3% and 5.0%, respectively). Importantly, Noratis’s NAVPS at end-FY20 implies a discount of c 11% compared with a 1% premium for Peach Group Property (NAVPS for Accentro not available).

General disclaimer and copyright

Any Information, data, analysis and opinions contained in this report do not constitute investment advice by Deutsche Börse AG or the Frankfurter Wertpapierbörse. Any investment decision should be solely based on a securities offering document or another document containing all information required to make such an investment decision, including risk factors. This report has been commissioned by Deutsche Börse AG and prepared and issued by Edison for publication globally.

Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).


Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt


London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

More on Noratis

View All

Latest from the Real Estate sector

View All Real Estate content

Brighter — Poised for revenue momentum

Brighter recently reported its results for the first quarter of 2021 and continues to be poised for revenue momentum at the end of the year. Actiste has market approval in Saudi Arabia, the United Arab Emirates (UAE) and Thailand, as well as a five-year distribution agreement in Qatar and five-year agreements in both Nigeria and Ghana. Once registrations are in place in Nigeria and Ghana, Brighter expects to receive €2.3m (SEK23.4m) and €1.2m (SEK12.2m), respectively, in initial orders in those countries. The approval processes in Nigeria and Ghana are expected to complete by the end of the year.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free