LGMMY - Vonovia: Despite Recent Rebound Still Has A Lot Of Gas Left In The Tank
2024-02-01 06:43:49 ET
Summary
- Vonovia stock has potential for growth in the medium and long term, with a significant in-place-to-market rent gap and interest rate cuts that may be deeper than expected.
- The German residential real estate market has been under pressure, causing a decline in stock prices for companies like Vonovia, TAG Immobilien, and LEG Immobilien.
- Based on the DCF model, fair P/BV for Vonovia shall be at 1.35x, while it currently trades at 0.7x.
Investment thesis
Although Vonovia ( VONOY , VNNVF ) has been already spotted by a handful of analysts, and the stock price gained over 70% since its bottom in March 2023, there is still a lot of potential in this stock in the medium and long term. In this article, I have tried to dig a little bit deeper than usual into some of the key drivers, as well as to quantify all the arguments in a DCF model. I have focused on Vonovia, but a similar market and macro conclusion can be applied to TAG Immobilien ( TAGOF ) and LEG Immobilien ( LEGIF ).
Why am I bullish on Vonovia?
First of all, an in-place-to-market rent gap is massive, even if it will take a couple of years to close it. Secondly, the peak of interest rate pressure in Europe is in my opinion behind us, and given poor consumer confidence in the eurozone, the pace of rate cuts may surprise positively. Thirdly, one should not forget about a sizable and profitable resi-for-sale business that is in the cyclical trough but is poised to recover given a structural lack of housing in Germany....
Vonovia: Despite Recent Rebound, Still Has A Lot Of Gas Left In The Tank