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Original-Research: Coreo AG (von GBC AG): BUY

Original-Research: Coreo AG - von GBC AG

Einstufung von GBC AG zu Coreo AG

Unternehmen: Coreo AG

Anlass der Studie: Research Note
Empfehlung: BUY
Kursziel: EUR 1.00
Letzte Ratingänderung:
Analyst: Cosmin Filker, Marcel Goldmann

H1 2023: Large portfolio acquisitions to come in 2024; EBIT break-even expected in 2024; price target: € 1.00; rating: BUY  
In the first six months of 2023, Coreo AG was able to increase rental income to € 3.17 million (previous year: € 2.82 million). As there were no property additions in both the 2022 financial year and the current 2023 financial year, the 12.7% increase in gross rental income was achieved on the same property basis. Portfolio optimisations carried out, such as the property handover in Kiel in the past 2022 financial year or the conclusion of a long-term rental agreement with the city of Wetzlar, have increased the revenue base, from which Coreo AG benefited in the first half of 2023. In addition, vacancies were already reduced in the past financial year and rent increases were implemented in some cases. However, part of the increase in gross rents is also due to the current market-related rise in ancillary costs, which resulted in a significant increase in advance operating cost payments of 44.1% to € 0.84 million (previous year: € 0.59 million).
Total operating costs of € 3.10 million (previous year: € 3.04 million) remained roughly at the previous year's level. Within costs, the cost of materials in particular increased to € 1.79 million (previous year: € 1.29 million). This was partly due to higher ancillary operating costs and partly due to maintenance and modernisation expenses, which relate in particular to the properties in Wetzlar, Delmenhorst and Göttingen. However, the increase in the cost of materials was offset by a decrease in personnel expenses and other operating expenses (including lower legal and consulting costs). At € -0.44 million (previous year: € -0.61 million), EBIT in the first six months of 2023 was therefore also higher than the previous year's figure.
We have prepared our forecasts on the basis of the current property portfolio. In addition, we also assume property acquisitions for the coming financial years, which will both have an impact on the company's rental income and, as part of the value-creating strategy, result in possible valuation income.
In the first six months of 2023, Coreo AG generated gross rental income of € 3.17 million. With the exception of the sale of the 119 residential units in the 'Hagenweg' property, the property portfolio is unchanged for the second half of 2023, meaning that comparable gross rental income is likely to be generated in the second half of the year. The loss of rental income from 'Hagenweg' of around € 0.20 million (GBC estimate) will be limited, as this will not occur until the fourth quarter of 2023. Compared to our previous forecast (see forecast dated 14 July 2023), we are nevertheless adjusting the expected rental income slightly more to € 6.12 million (previously: € 6.53 million).
This adjustment is primarily due to the delay in the purchase of the Hagen/Rostock portfolio, for which the purchase price (total investment volume: € 2.5 million) has already been finalised. We had previously expected to acquire the property in the second half of 2023. As things stand, however, the property will not be acquired until the coming financial year. In addition, the transfer of the Spree-Ost portfolio, for which a purchase agreement has been in place since 2021, is planned for the coming 2024 financial year. This portfolio comprises 1,341 flats and 15 commercial units and, as the largest acquisition in Coreo's history, would have a significant impact on the company's revenue and earnings performance. As a precautionary measure, we have postponed the acquisition date to the second half of 2024 (previously: first half of 2024) and are therefore also reducing the expected rental income for 2024 to € 8.22 million (previously: € 9.56 million). This effect is not relevant for the 2025 financial year; the lower expected rental income of € 12.15 million (previously: € 12.36 million) expected in this financial year is solely a result of the sale of 'Hagenweg'.
The book loss of € 0.61 million from the sale of the properties on 'Hagenweg' in Göttingen was recognised in full in the first half of 2023, meaning that no further negative effects are expected for the second half of the year. In our previous forecasts, we did not anticipate any valuation losses; on the contrary, we assumed valuation gains due to the investments in the existing portfolio. In the updated forecast, we have taken into account both the book loss and conservatively assumed slightly lower book gains on the existing portfolio. Accordingly, the company should report a negative EBIT of € -0.12 million in the current 2023 financial year (previously: € 2.18 million). With the expected strong increase in rental income, in particular due to the addition of the two already fixed portfolios, EBIT break-even should be achieved sustainably from the coming 2024 financial year.
As part of our DCF valuation model, we have determined a new price target of € 1.00 (previously: € 1.30). The price target reduction is solely a consequence of the forecast adjustment. We continue to assign a BUY rating.  

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Date and time completion (german): 17.11.23 (07:55 am) Date and time first distribution (german): 17.11.23 (10:30 am) Date and time completion (english): 20.11.23 (08:02 am) Date and time first distribution (english): 20.11.23 (10:00 am)

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