Yesterday, UBM released its Q3 results, showing continued muted top-line development but promising signs from the residential segment. In detail:

Q3 total output, which is defined as sales plus pro-rata sales of companies consolidated at-equity as well as proceeds from share deals, increased by 7.2% yoy to € 70.3m. This was driven by the sale of property shares and the progress of construction on previously sold real estate projects. In addition, UBM had another strong quarter in terms of residential units sold, as the number of units increased sixfold to 186 and a total of 283 at 9M. For FY, management targets to sell a total of 400 units. Overall, UBM has 3,000 units on sale or under development, which are seen to be sold over the next 4 years, providing sound visibility on residential output.

Despite this, Q3 sales declined yoy by 18% to € 20.5m, thus being significantly behind our estimate of € 35m, as we expected more of total output to be realized as sales. However, management already painted a confident picture for FY25e, targeting the disposal of the LeopoldQuartier Office in Vienna, which would lead to a top-line spike in H2. On the other side, management remained cautious regarding the disposal of the Timber Pioneer, as all interested buyers seek to see the property rented out, while there are still 4,500 sqm vacant (~30% of floor space).

On a positive note, Q3 EBITDA improved to € 0.3m, based on positive changes to the portfolio as well as the absence of negative valuation results.

While it is still uncertain when the market will fully reopen, first positive signs are visible, especially in residential, but also recent letting successes in office (i.e. LeopoldQuartier in Vienna), point towards rehabilitation.

That being said, UBM remains well positioned, having further smoothened the maturity profile with the recent bond placement. Moreover, the company’s product should be in great demand once the market reopens given the strong sustainability footprint in the pipeline. This should make UBM projects attractive, given tightening regulations in connection with the EU taxonomy.

BUY with an unchanged € 27.00 PT based on DDM.