Update KWG / bought Flughafen Wien / Macro Enterprises

KWG

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:

	31.12.2013	30.06.2014
Borrowings	235,475	229,977
Financial Liabilities	4,248	3,440
minority interest book	5,879	6,038
accrued taxes	166	312
1/2 pension liabilites	832	849.5
heating equipment PV	812	812
Cash/Marketable Securities	(7,043)	(6,427)
Financial Assets	(996)	(852)
sum	239,373	234,150
Current/Non-Current/Property	424,476	421,133
LTV	56.39%	55.60%

The problem with KWG is the low FFO cashflow:

	H1/2013 restated	H1/2014	normalized	annualized	2015*
Vermietungserlöse	22,513	22,156	22,156	44,312	46,158
Veräußerungserlöse aus zum Verkauf gehaltenen Immobilien		2,621		0
Veräußerungserlöse aus als Finanzinvestitionen gehaltenen Immobilien	9,186	5,383		0
Umsatzerlöse	31,698	30,160	22,156	44,312	46,158
Immobilienaufwendungen	-9,925	-10,375	-10,375	-20,750	-20,750
Aufwendungen aus dem Abgang von zum Verkauf gehaltenen Immobilien		-1,326		0
Aufwendungen aus dem Abgang von als Finanzinvestitionen gehaltenen Immobilien	-9,225	-5,326		0
sum	12,548	13,133	11,781	23,562	25,408
Gewinne aus der Anpassung des beizulegenden Zeitwertes	8,896			0
Abschreibungen und übrige außerplanmäßige Wertminderungen	-105	-66		0
Sonstige betriebliche Erträge	750	435		0
Personalaufwendungen	-1,527	-1,818	-1,818	-3,636	-3,636
Sonstige betriebliche Aufwendungen	-2,355	-3,339	-2,447	-4,894	-4,894
Betriebsergebnis (EBIT)	18,206	8,345	7,516	15,032	16,878
Finanzerträge				0
Finanzaufwendungen	-5,337	-4,967		0
Finanzergebnis	-5,335	-4,959	-4,959	-9,918	-9918
Ergebnis vor Ertragsteuern (EBT)	12,872	3,386	2,557	5,114	6,960
Ertragsteuern	-2,337	-579	-405	-809	-1,101
Konzernergebnis nach Ertragsteuern	10,535	2,807	2,152	4,305	5,859
davon entfallen auf Anteile ohne Beherrschung	479	189	189	378	394
davon entfallen auf Anteilseigner des Mutterunternehmens	10,056	2,618	1,963	3,927	5,464
EPS in € / normalized FFO	0.62	0.16	0.12	0.25	0.34
number shares	15,881,234	15,881,234	15,881,234	15,881,234	15,881,234

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

Conclusion
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.