Wednesday 14 August 2013

Analysis of DIC Asset

A German real estate company focused on commercial property

Company: DIC Asset

Business: DIC Asset AG specialises in commercial real estate, particularly office property and are active in two segments: Commercial portfolio with contains the real estate held as inventory on a long-term basis with stable, attractive rental yields and the Co-Investments segment which involves fund investments, joint-venture investments, and interests in development projects.

Active: In Germany

P/E: 30.2

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

 The P/E of DIC Asset is very high with 30.2 but the P/B is good with 0.6 which gives, in my opinion incorrectly, a buy according to Grahams formula. The earnings to sale is up at 10% which is fully acceptable. The ROE is however awful with only 1.9%. The book to debt is at a ratio of 0.4 which is pretty similar to other real estate companies but I still find it low. In the last five years they have had a negative revenue growth of -2.2% which gives us a motivated P/E between 8 to 10. To me that means that this stock is overvalued by a factor of three times. They do pay dividends at a good level of 4.5% but that represents 137% of their earnings and it is the second year in a row that they pay out more in dividends then what they earn probably they high dividend is the only thing keeping the stock price up at the moment but artificially.

Conclusion: I would definitely not buy DIC Asset and if I would own the stock I would sell them. I doubt they will manage to keep up the dividend and when they cut that then the price of the shares will most likely fall dramatically.

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