Helma Eigenheimbau — Promising new order intake

Helma Eigenheimbau (DB: H5E)

Last close As at 20/04/2024

57.80

−0.40 (−0.69%)

Market capitalisation

231m

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Research: Industrials

Helma Eigenheimbau — Promising new order intake

Helma Eigenheimbau’s revenue has remained relatively resilient despite the impact of the pandemic as it expanded in FY20 by c 4.1% y-o-y to €274m. The company has also beaten the guidance it issued in August of pre-tax profit at €14–17m, reporting €22.5m for the year on the back of solid performance of all group companies in H220. For FY21, management guides to group revenue of €300–310m in FY21 and pre-tax profit at €25–26m. The company also targets annual revenue above €400m and more than €40m pre-tax profit by 2024 on the back of its extensive landbank, which represented a revenue potential of €1.8bn at end-2020.

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Written by

Michal Mierzwiak

Analyst

Industrials

Helma Eigenheimbau

Promising new order intake

Real estate

Scale research report - Update

26 March 2021

Price

€52.40

Market cap

€210m

Share price graph

Share details

Code

H5EX

Listing

Deutsche Börse Scale

Shares in issue

4.0m

Last reported net debt at 31 December 2020

€198.4m

Business description

Helma Eigenheimbau provides planning, sales, finance advisory and construction services for turnkey, low-rise domestic properties. It operates in the surroundings of major cities and selected holiday locations. The property development segment is operated by Helma Wohnungsbau, while Helma Ferienimmobilien offers pre-planned holiday properties and apartments including land plots.

Bull

Supply shortage in the German residential market.

Strong track record.

Integrated services suited to customer needs.

Bear

Tightening of lending conditions for real estate financing facilities.

Bottlenecks in the German residential market.

Limited availability of building land.

Analysts

Milosz Papst

+44 (0) 20 3681 2519

Michal Mierzwiak

+44 (0) 20 3077 5700

Helma Eigenheimbau’s revenue has remained relatively resilient despite the impact of the pandemic as it expanded in FY20 by c 4.1% y-o-y to €274m. The company has also beaten the guidance it issued in August of pre-tax profit at €14–17m, reporting €22.5m for the year on the back of solid performance of all group companies in H220. For FY21, management guides to group revenue of €300–310m in FY21 and pre-tax profit at €25–26m. The company also targets annual revenue above €400m and more than €40m pre-tax profit by 2024 on the back of its extensive landbank, which represented a revenue potential of €1.8bn at end-2020.

Revenue increase driven by lower-margin business

Despite continued top-line expansion, Helma reported a slight year-on-year decline in earnings. This was likely at least partially attributable to the lower revenues in the higher-margin property development segment, which is the only one materially affected by the pandemic. The company reported FY20 EBIT of €22.2m versus €22.8m in FY19, with margin down from 8.7% to 8.1%. Similarly, net income for the year was €15.4m and fell slightly short of €16.1m posted in FY19.

Strong rebound in new order intake in H220

In FY20, Helma reported a record high new order intake, which was up c 5.4% y-o-y to €312.5m, despite the 17.8% y-o-y decline in H120. It was mainly driven by a c 72% increase in the holiday property development segment to €74.5m (making up close to 24% of group total at end-2020). With increasing demand for domestic holidays and management estimating close to €570m revenue potential over five to seven years, it seems well positioned to establish itself as a third pillar of the company’s business and potentially outgrow the construction services unit.

Healthy dividend yield of 2.9%

Based on 2021–2023e P/E multiples, the company’s shares trade at a slight discount to its peers. In contrast, based on EV/EBITDA multiples, which account for Helma’s relatively high leverage level and net cash positions of both British peers, these shares trade at c 45% premium over the same period. Management proposed a dividend payout per share from FY20 earnings of €1.54, which translates into a c 2.9% yield. While the distribution is lower than in FY19 (€1.85 per share), it was the maximum amount available under the company’s policy.

Consensus estimates

Year
end

Revenue
(€m)

PBT

(€m)

EPS

(€)

DPS
(€)

P/E

(x)

Yield
(%)

12/19

263.2

23.6

4.04

1.85

13.0

3.5

12/20

274.0

22.5

3.84

1.54

13.6

2.9

12/21e

306.4

25.6

4.41

1.74

11.9

3.3

12/22e

339.2

30.3

5.45

1.93

9.6

3.7

Source: Helma Eigenheimbau accounts, Refinitiv consensus as at 26 March 2021.
Note: Consensus data for Helma is based on the estimates of four analysts.

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.

Financials: Top-line expansion on lower profitability

In FY20 Helma’s business proved its resilience by reporting a 4.1% y-o-y increase in revenue to €274.0m, compared to pre-pandemic top-line compound annual growth rate (CAGR) between 2015 and 2019 of 6%. Solid annual performance was mainly attributable to H220 figures, which remained strong partly due to the typical seasonality of revenues and partly due to a rebound from the COVID-19-induced H120 weakness. This trend was even more evident in the net new order intake, as Helma reported a 17.8% y-o-y decline in H120, just to close the year with the record high total of €312.5m, translating into a 5.4% yo-y increase.

The construction services unit contributed €115.8m to revenues (42.3% share) following an increase of c 17.8% yoy. In contrast, the higher margin residential property development division decreased by 17.2% yoy to €102.7m (below construction services, contrary to previous years), likely affected by COVID-19. The decline was only partially offset by the 35.8% y-o-y expansion in the holiday property development business, reaching €54.0m sales (19.7% of total revenue). Both materials expense ratio and personnel costs ratio increased slightly to 75.9% from 75.5% in FY19 (with Helma’s headcount up to 346 employees at end-2020 from 322 at end-2019) and to 9.7% from 9.5% respectively. This had a negative effect on earnings, with EBIT declining by 2.7% y-o-y to €22.2m and EBIT margin down by 56bp to c 8.1%. Similarly, FY20 EBT declined slightly to €22.5m from €23.6m in FY19 but was clearly ahead of management guidance issued in August 2020 of €14–17m. With an effective tax rate in FY20 of c 31.5%, on a par with the FY19 figure, the net income after minority interest fell proportionately to €15.4m from €16.1m, which translated into an EPS decline from €4.04 to €3.84.

Although the company’s net debt increased from €174.9m at end-2019 to €198.4m at 31 December 2020, Helma retained a strong equity ratio of 27.5%, compared to 28.6% at the start of the year. The average interest rate on the group’s financial liabilities at end-2020 was c 2.23%, which management says sits well below the average of the company’s competitors.

Exhibit 1: Financial highlights

€000s

FY20

FY19

y-o-y

Revenue, including:

273,993

263,243

4.1%

Helma Eigenheimbau (construction services)

115,843

98,336

17.8%

Helma Wohnungsbau (residential property development)

102,671

123,942

-17.2%

Helma Ferienimmobilien (holiday property development)

53,982

39,751

35.8%

Hausbau Finanz

1,497

1,214

23.3%

Change in stocks of finished goods and work in progress

36,272

9,789

270.5%

Other operating income

2,721

2,609

4.3%

Expense for materials and third-party services

(241,685)

(207,776)

16.3%

Personnel expense

(26,633)

(24,956)

6.7%

Other operating expenses

(19,912)

(17,738)

12.3%

Earnings before interest, taxes, depreciation and amortisation (EBITDA)

24,756

25,171

-1.6%

Depreciation / amortisation

(2,587)

(2,389)

8.3%

Operating earnings (EBIT)

22,169

22,782

-2.7%

EBIT margin

8.09%

8.65%

-56bp

Finance expenses

(650)

(869)

-25.2%

Other financial result

942

1,681

-44.0%

Earnings before taxes (EBT)

22,461

23,594

-4.8%

Income tax

(7,065)

(7,419)

-4.8%

Net income before minority interests

15,396

16,175

-4.8%

Minority interests’ share of earnings

(31)

(31)

0.0%

Net income after minority interests

15,365

16,144

-4.8%

Net margin

5.61%

6.13%

-52bp

Source: Helma Eigenheimbau accounts

With record high new order intake in FY20 (details below), management expects significant operational improvement in FY21, guiding to group revenue of €300–310m, which would constitute c 11% y-o-y increase. Achieving the targeted €25–26m EBT could be assisted by the continued rebound in the property development segment generating higher margins.

Holiday properties developing into a third strong pillar

After initial difficulties in H120, Helma reported a record high new order intake in FY20 of €312.5m (up 5.4% y-o-y), which brings the net order book position at end-2020 to the new high of €240.6m, compared to €202.7m at end-2019. The company’s operations were traditionally based on two main segments: construction services and property development, which contributed over 80% of company’s revenues and new orders per year since 2011 (when Helma launched its holiday property development unit). Although both segments remain the largest in terms of sales volume, we note the significant expansion of the holiday property development segment last year. While its share in FY20 revenues remained below 20%, the €74.5m new orders received over the year constitute almost 24% of the group total. According to the management, the segment benefitted from increased demand for domestic holidays due to travel restrictions introduced worldwide to limit the impact of the pandemic. The subsidiary reported strong sales figures at OstseeResort Olpenitz and NordseeResort Büsum, which were further assisted by the sales launch in other projects.

Exhibit 2: Helma’s net new order intake and order book position

Source: Helma Eigenheimbau, Edison Investment Research

Helma expects to reach €400m annual revenue by 2024 at the latest, with €125m contribution from construction services and €275m from property development activity (including holiday properties). This implies a c 8% aggregate increase in the construction segment revenues over the next four years, compared to the development business expansion by c 170% over the same period (Edison estimates based on management guidance). The development business will benefit from the extensive land bank, with c €1.8bn potential revenue at end-December 2020 as per the company’s estimates (c €1.5bn at end-2019), which should largely be realised within next five to seven years. This amount is assessed based on the company’s land bank, the number of units that could be built on it and their potential sale price. We note that c €565.4m of this revenue potential is attributable to the holiday property business (31.3% share, compared to 30.7% at end-2019), which implies a c 10% revenue CAGR over the seven-year period, according to our calculations. We also note that Helma continues to explore potential development sites, which could be acquired further assist mid-term expansion.

Residential real estate market performing relatively well

Despite COVID-19, overall investment volume in the German real estate market fell by only 11% year-on-year to €81.6bn, with Q420 deal value (€23.3bn) already exceeding the quarterly average for the last five years (€19.5bn). To stimulate the global economy, interest rates in Germany remain very low, making some risk-averse investors look for opportunities in the real estate segment, which could be considered a safe haven. The resilient ‘living’ sector (including residential, student housing and micro living) was most sought after, with a €25.2bn transaction volume in FY20 (31% share) according to JLL.

According to the Federal Statistical Office of Germany (Destatis), the annual turnover in building completion work increased by 6.2% y-o-y in 2020, which marks the seventh consecutive annual growth. It was mainly attributable to the strong rebound in Q420, with c 13.3% higher turnover than in the corresponding period of 2019. Meanwhile, the housing construction segment fared even better, posting 11.4% y-o-y improvement in 2020 turnover and 7.6% increase in new order value.

Valuation

We continue to value Helma against a peer group of residential real estate developers, which includes Instone, a domestic peer, and three in Europe (Bonava, Taylor Wimpey and Barratt Developments). We have removed Consus Real Estate from the group due to the lack of consensus estimates and the change in business profile following the acquisition by Adler Group. We also note both British peers have a net cash position, which results in lower EV/EBITDA multiples. Consequently, Helma trades at over 40% premium to the group averages for 2021–2023e figures. Based on P/E multiples, which account for Helma’s relatively high leverage level by capturing interest expense, the company’s shares trade on slight discount to peers over the same period.

With a relatively strong equity structure and consistently positive earnings stream in recent years, Helma maintained its dividend policy (payout ratio range of 25% to 50% of the net profits generated by the parent company according to the accounting standards of the German Commercial Code). Management proposed the distribution of c €6.2m from €12.4m FY20 standalone unappropriated retained earnings, which equals €1.54 dividend payment per share, translating into 2.9% yield.

Exhibit 3: Peer group comparison

 

Market cap

EV/EBITDA (x)

P/E (x)

 

(m)

2021e

2022e

2023e

2021e

2022e

2023e

Bonava

SEK11,268

12.8

9.4

8.3

14.6

10.3

9.0

Instone Real Estate

€1,127

9.0

7.0

6.2

11.7

8.8

7.4

Taylor Wimpey

£6,581

7.8

6.9

5.9

11.2

9.9

8.8

Barratt Developments

£7,777

9.6

8.7

8.1

12.3

11.2

10.5

Peer group average

9.8

8.0

7.1

12.4

10.1

8.9

Helma Eigenheimbau

€212

14.1

11.7

10.3

11.9

9.6

8.2

Premium/(discount) to peer group

44%

46%

45%

(4%)

(4%)

(8%)

Source: Refinitiv consensus at 26 March 2021. Note: Consensus data for Helma is based on the estimates of four analysts.


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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

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

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