Tuesday, 16 December 2014

Update KWG / bought Flughafen Wien / Macro Enterprises


After selling most some of my other real estate holdings (IMW,Sirius), the first idea is of course to increase positions, which have not performed according to my expectations.

The LTV is still in the green:

Financial Liabilities4,2483,440
minority interest book5,8796,038
accrued taxes166312
1/2 pension liabilites832849.5
heating equipment PV812812
Cash/Marketable Securities(7,043)(6,427)
Financial Assets(996)(852)

The problem with KWG is the low FFO cashflow:

H1/2013 restatedH1/2014normalizedannualized2015*
Veräußerungserlöse aus zum Verkauf gehaltenen Immobilien
Veräußerungserlöse aus als Finanzinvestitionen gehaltenen Immobilien9,1865,383
Aufwendungen aus dem Abgang von zum Verkauf gehaltenen Immobilien
Aufwendungen aus dem Abgang von als Finanzinvestitionen gehaltenen Immobilien-9,225-5,326
Gewinne aus der Anpassung des beizulegenden Zeitwertes8,896

Abschreibungen und übrige außerplanmäßige Wertminderungen-105-66
Sonstige betriebliche Erträge750435
Sonstige betriebliche Aufwendungen-2,355-3,339-2,447-4,894-4,894
Betriebsergebnis (EBIT)18,2068,3457,51615,03216,878

Ergebnis vor Ertragsteuern (EBT)12,8723,3862,5575,1146,960
Konzernergebnis nach Ertragsteuern10,5352,8072,1524,3055,859
davon entfallen auf Anteile ohne Beherrschung479189189378394
davon entfallen auf Anteilseigner des Mutterunternehmens10,0562,6181,9633,9275,464
EPS in € / normalized FFO 0.620.
number shares15,881,23415,881,23415,881,23415,881,23415,881,234

After looking at the new numbers, one can expect an FFO of 0.34 per share for 2015. This would justify a price of 6.80 at a yield of 5%. For 2015, I expect rents to increase 2% and 60*12+20*12 increase in cold rents due to renovation projects. I think an increase of 2% is prudent:
"As of 30 September 2014 the vacancy rate of the KWG portfolio improved by 10.4% to 12.9% (30/09/2013: 14.4%). At the same time, average portfolio rents rose slightly from €5.00/sqm/m to €5.10/sqm/m."
After finishing renovations vacancy will drop further, which is party included in the expected new lettings.
source H1/2014 report
Properties are valued at 421 and net cold rent is ~ 31 mio, which implies a yield of 7.4%. The book value is 10.80/share. But as long as recurring cash flows do not improve the share price will not rise sustainably. Compared with my investment in IMW (purchased at 2.5-3.3 and sold between 7-9.20), KWG was a drag on performance YTD. I will hold on to my position. Maybe some cost savings materialize as the company moved headquarters to Berlin nearer to its parant company, although I have modeled none.

Flughafen Wien is a short-term speculative bet on a tender offer not being accepted by too many shareholders. You can read a write-up at one of my favourite blogs.

Macro Enterprises has announced a buy-back today. You can read more at their website, red corner blog or Corner of Berkshire.  Macro is a Canadian construction company in the ressource industry. I hope not to be too early as with Sberbank, but believe Macro's balance sheet will shield the company from an outright bancruptcy in 2015 and the company is worth multiples of the current price if the situation improves. It is no compounder, but more a kind of an option like Sberbank but less risky. The position is about 2.5%, but this can change quickly.

Friday, 12 December 2014

Sold IMW/Sirius bought sberbank


The rest of the IMW position was sold at current prices of ~9.18€.

#sharesequitydeferred taxP/EQP/(EQ+DT)price
3/31/201416,466,6668.57 €1.07 €1.070.95€ 9.18
pro forma16,466,6669.21 €1.07 €1.000.89€ 9.18
9/31/201416,466,666€ 8.83€€ 9.18

9/30/20133/31/20133/31/2014pro forma09/31/2014
1Financial Derivative Liabilities6,389,0039,3993,5073,5070
1minority interest book3,884,7953,7204,2954,2954,429
0.5Pension/Employee Liabilities470,181455430430445
1Remaining purchase price liability Dukes Court2,7009,700000
1Cash/Marketable Securities-11,710,354-26,297-10,684-48,754-47,511
1short-term financial assets-7,294,944-5,476-2,742-3,990-2,392
1other long-term assets ( pledged bank deposits)0-1,000000



My pro forma estimate was quite near the real numbers. As the price has risen there is no clear margin of safety left in the stock, albeit I believe it to be still undervalued a little bit.

An other way to look at the situation is as follows, if IMW would consider selling itself:
net debt = 105,126
mcap= 9.18x16,466,666= 151,164
ev= 256,290
- non Valbonne@book = 3,488 (Vorratsimmobilien)+22,440 (Austerlitz)+10,700 (Industrieweg)=36,628
= 219,662 (implied value Valbonne)

cold rent 2015* = 17,600
multiplier Valbonne = 219,662/17,600= 12.5
realistic multiplier Berlin property = 18
Value Valbonne = 316,800
- 219,662 (implied value Valbonne)
= 97,138 or 5.90 per share
fair value = 5.90+9.18= 15.08€
upside = 64%

As I don't believe a sale is imminent, the position was sold. Management has now the opportunity to destroy value, because of the cash balance.


The price has risen. The stock was listed in Johannesburg, too. The current price is 5.93 or 0.41€. In London 0.405. The new listing and the announcement of an accreditive aquisition have driven the stock price higher. As I have no faith in management to outperform, this was a good oppurtunity to sell. Looking at assets and current earnings there is no satisfactory margin of safety left for me.  The dilutive capital increases without issuing rights have favoured the investors with large stakes. The interest of small investors like me seem to be of little interest.


A very small position in Russian sberbank was established. The rest of the cash will propably be deployed in other east european assets and in commodities stocks, as there seem to be bargains in the markets today. Sberbank is sensitive to the ruble and thereby to the price of oil. All Russian stocks have of sort of an commodity angle. A valuation of sberbank does not make a lot of sense to me. This is a contrarian bet and kind of a binary option on the common sense of the Russian authorities. A total loss is not implausible.

Links Sberbank:
Investor relations
Kerrisdale Capital letter for Q3 2013 @beyondproxy.