Saturday 17 August 2013

Analysis of Ariston

A German commercial real estate company

Company: Ariston Real Estate AG (sorry their homepage is only in German)

Business: A German real estate company that are making money via four fields:
1. Income from the property management which is commercial property  2. Investment income of daughter companies, 3. Income from sale of properties and finally income from opportunistic real estate investments.

Active: Only in Germany, they have 137000 m2 on six locations in eight real estates.

P/E: 4.8

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

The P/E of Ariston is excellent with only 4.8 and the P/B is silly low with 0.2 which gives according to Graham a very clear buy! The earnings to sales are also not bad with 16% but the ROE could have been a bit better since it is only 4.9. The book to debt is also not so good because they have a lot of debt but at least every second real estate company seems to be around a ratio of 0.3. The yearly growth in the company has been 2.6% for the last five years which place it slightly above inflation in Germany so it is acceptable but definitely not more. The motivated P/E for Ariston would be between 12 to 14 which means that the company is very clearly undervalued on the market today which is interesting since most of them are highly overvalued. They do not pay any dividends.

Conclusion: It is a small company that is doing pretty ok. I would be hesitant to step in as shareholder due to two reasons. The size of the company (too small) and secondly due to that the rest of the real estate stock are as pushed up as they are and I doubt this company would not drop when the rest of them do.

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