On Monday, UBM released final FY 2022 results, slightly exceeding the preliminary figures.

Sales came in at € 134m (-52% yoy), significantly below our estimate of € 195m. The sharp decrease is explained by a significantly lower activity on the European real estate transaction market, as buyers acting cautious as a result of rising interest rates and cost inflation .

EBT decreased by 48% yoy to € 31.5m, thus slightly exceeding the preliminary range of € 30-31m. In light of the ongoing low activity on the market, we still regard this as a strong result, particularly in comparison to the company’s key peers. With an EBT margin of 23% UBM is clearly outperforming the likes of Helma (1.1%) or Instone (8.3%), thanks an excellent performance of fixing costs for ongoing projects.

Despite macro headwinds, UBM continues to be a reliable source of dividends, as management will propose a dividend of € 1.10 per share, equaling a payout ratio of 49% (EPS based), which is in line with previous years. Given yesterday’s closing price, this implies a dividend yield of 4.0%, the highest in the ATX TD index.

Separate from the release, UBM announced the signing of a lease agreement for 67% of the rentable area of the Timber Pioneer, Frankfurt’s first ever timber hybrid building. The space will be let to Universal Investment on a 12-year term, which should strengthen UBM’s position in selling the property. Management aims for a disposal in H2.

Overall, UBM is seen to look well equipped to cope with the current macroeconomic headwinds, as earnings from the existing € 2.1bn development pipeline look set to protect profitability going forward. Even though we expect headwinds to remain during H1, the shortage of supply for EU taxonomy conform assets should help sustainable real estate players to gain traction again starting in H2.

In fact, over 260k sqm of timber hybrid construction (eNuW: € 1.3bn sales volume) are currently in the realization or planning stage. In our view, this strategic alignment should become a significant competitive edge in the carbon heavy real estate industry, as investors are thriving to improve their ESG ratings.

We reiterate BUY with a reduced PT of € 35.00 (old: 39.00) based on DDM.