VNNVF - Vonovia: A Mid-Single Digit Return For Recessionary Times

2024-03-18 16:29:13 ET

Summary

• Vonovia switched to adjusted earnings before tax (EBT) as its key performance measure, along with operating free cash flow.
• EBT dropped 6.6% in 2023 and is expected to further decline by 6.2% in 2024.
• The key Rental segment grew in 2023 despite disposals, with the remaining three reporting segments struggling.
• The company offers a safe market cap rate of 3.4-4.1%, with rents expected to outpace inflation in the medium term.
• The massive debt position and deferred taxes remain key risks for the investment case.

Introduction

I previously covered Vonovia SE ( OTCPK:VONOY ) back in May 2023 where I argued that the company would be a key beneficiary of a reversal of tightening ECB policy, as well as a good option to diversify interest rate risk for holders of high rate beneficiaries such as Commerzbank AG ( OTCPK:CRZBF ). Over the past year, I would say both companies have outperformed my expectations, rising by about 25%:

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