Friday 24 January 2014

Analysis of TAG Immobilien

A German real estate company

Company: TAG Immobilien

Business: A German real estate company. Their main focus is with residential property in Germany and little to none commercial property.

Active: Only in Germany in the region of Hamburg, Berlin, Salzgitter, as well as the German states of Thuringia, Saxony and North Rhine-Westphalia.

P/E: 6.5

contrarian values of P/E, P/B, ROE as well as dividend

The P/E for TAG Immobilien is looking great with 6.5 and the P/B is also fully acceptable with 1.0 which gives a very clear buy from Graham. Their earnings to sales are also great with 40% and the ROE is also very nice with almost 16%. the book to debt for a real estate company is good with 0.4. In the last five years they have had an excellent growth of over 38% (slightly doped due to sale of property and rent based it is still around 20% yearly growth so still great!) which gives us a motivated P/E of around 50 to 55 which means the market is highly undervaluing TAG Immobilien today. They pay a small dividend of 2.8% which on the other hand only represents 18% of their earnings so it should be possible to keep it up.

Conclusion: Graham consider this to be a buy but I am not so pleased with it. Their earnings has lately (third year now) been doped by large sales of property and they seem to have a strategy of keeping a property value of around three billion and when the property get valued higher they sell some off. Without these sales their revenue and profit would be much less interesting. I still think that they are cheap at the moment and maybe they are preparing for the German real estate bubble to burst which is why they are selling off property but in my opinion the core business must still be able to generate a nice profit and that I just do not see in this case. So I will keep my fingers away from this cookie jar. But maybe by digging deeper into you guys can find something of interest!

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