UBM released preliminary FY ’23 figures, which came in below our estimates following higher than anticipated devaluations of the company’s development as well as standing asset portfolio. Management now expects an EBT loss of € 39m (vs eNuW of € -23.6m vs eCons € -21.4m). Final FY figures will be released on April 11^th.

Overall, UBM had to write down € 70m throughout 2023, which should have been divided equally into project and standing asset revaluations. The main reason for this is seen to be the ongoing weakness of the real estate market, with only slight gradual increases in transaction volumes and ever more larger players filing for bankruptcy (e.g. Signa). Although management indicated that technical pressure for further devaluations in 2024e should be limited, we conservatively estimate a slight devaluation of c. 1%.

Despite the devaluation and the redemption of its hybrid bond, UBM continues to provide sound balance sheet metrics with a cash position of € 152m and an equity ratio which remains in the target corridor of 30-35%. Importantly, the company has no major maturities until November 2025 (€ 120m corporate bond), which marks a major competitive advantage as it provides management with sufficient headroom until the market regains traction.

On another positive note, the company was able to divest its 33.5% share of Palais Hansen to Wiener Städtische in Q4. Given a fair value of € 100m, a 7% discount to book value and an LTV of 45% this should have resulted in net cash inflows of c. € 17m (eNuW). Moreover, a 25% in the Vienna-based project “Central Hub”, a mix between office and light industrial, was acquired. The 9,800m sqm project is set to be completed in Q1 ’25.

Overall and despite the muted FY 2023 preliminary figures, we continue to like UBM as we regard the company as well equipped to cope with the current macroeconomic headwinds, as earnings from the € 2.3bn pipeline should protect profitability going forward (eNuW: 10-15% developer margin). Moreover, with 75% of the pipeline being planned in hybrid-timber construction, the company is in a perfect position to benefit from the increasing pressure for investors to comply with the EU taxonomy. Hence, demand for projects should further increase going forward.  

We reiterate our BUY recommendation with a new PT of € 28.00 based on DDM.