Saturday, December 12, 2015

Analysis of Aareal Bank 2015


Aareal Bank, a German bank directed towards property

Company: Aareal Bank

ISIN DE0005408116 | WKN 540811

Business: A German bank specialising in property. They have two larger segments: Structured Property Financing (offers financing concepts for hotels and retail etc.) and secondly Consulting/Services (services for housing, commercial property as well as waste disposal and energy markets in terms of electronic banking and mass payment transactions).

Active: They have three regions: Europe, North America and Asia in total they are present in 25 countries when including the Baltic States.

P/E: 5.9 (P/E5: 14.2 though!)


Here you can find the previous analysis of Aareal Bank.

This company was re-analysed due to a request.

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

The P/E of Aareal Bank is excellent with 5.9 (the P/E5 is a bit worse though with 14.2) and also the P/B of 0.7 is great. This gives a very clear go from Graham. The earnings to sales are very nice with 29% and the ROE is acceptable but also not more than that with only 11.9%. The book to debt ratio is very low with 0.05 but not something unheard of for banks.
Their yearly revenue growth rate is up at 2.3% which is ok considering inflation and this then gives us a motivated P/E of 11 to 13 which means that Aareal Bank is undervaled based on current P/E but fairly valued based on P/E5.
They pay a very nice dividend of 4.2% that, which is even better still, only corresponded to 24% of their earnings.
They recently made a sale of their Swedish part which should bring in around 70 million in earnings (some in 2015 but most in 2016) and the third quarter already looked good.

Conclusion: Graham still says yes to Aareal Bank and I am still uncertain. The share price is more or less back to where it was when I last made the analysis and they have had some very nice EPS and also this year seem to turn out very well. The P/E is good, the P/B is good, the ROE is so, so and the dividend is excellent. I honestly do not know why I feel uncomfortable with Aareal Bank but I do.

If this analysis is outdated then you can request a new one.

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