Yesterday, UBM released muted Q1 results following the continued standstill on the European real estate transaction market. Yet, the company was able to dispose some smaller non-strategic assets.  

Q1 sales increased on a low level by 14% yoy to € 20.4m (eNuW: € 25m) and were predominantly driven by the progress on construction of previously sold projects, which are recognized over time based on the percentage of completion. Q1 EBITDA decreased yoy and came in at € -2.2m. The decline can be mainly attributed to an increase in material expenses, mainly related to construction costs, as well as slightly higher other OpEx, which was mainly due to unfavorable FX-effects.

On a positive note, the company had a promising start to the year regarding the disposal of non-strategic assets. In fact, UBM sold five slots of the Arcus City to a Czech construction company, one building of the Poleczki Business Park to Porr as well as a 15% stake of the Andaz hotel in Prague to IGO, which now holds a 40% overall stake. While no further details were disclosed, the net cash inflow from the transaction should amount to c. € 25m (eNuW). Overall, management is in advanced negotiations to sell further non-strategic assets as it targets a total net volume of € 75m in FY ‘24e. Importantly, no disposal was made below book value, which has to be seen as a clear hint that the trough has been reached.

Despite this, management provided a rather conservative outlook for FY ‘24e as it is expecting a pre-tax loss (eNuW new: € -7.7m), which is however expected to be an improvement compared to FY ’23 (€ -39m). Given that a sudden reopening of the market is still not in sight, we, however, regard this as reasonable despite the positive trends mentioned above.

All in all, we continue to consider UBM to be well positioned for the pending reopening of the transaction market, given its appealing product offering, which is focussed on sustainable real estate projects. In fact, as of Q1, 77% of the company’s € 1.9bn 4-year pro-rata pipeline consists of timber-hybrid projects, which do not only significantly reduce the carbon emissions but also offer cost advantages due to the modular and serial construction. We hence expect UBM’s projects to be meet strong demand once the market reopens, as investors become increasingly under pressure to comply with the EU taxonomy.

The stock remains a BUY, new PT of € 27.00 based on DDM.