26. January 2021 | 08:00 CET
HeidelbergCement, Pollux Properties, Aareal Bank: Better than concrete gold
Real estate is the Germans' favorite asset class. Even during the first lockdown, market participants did not lose their nerve. Although the current situation for commercial real estate is not exactly rosy, with vacancies even in many inner-city locations, at least residential real estate is developing as if there were no crisis. Reason enough to take a closer look at three real estate stocks.
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ISIN: SG1I77884290 , DE0006047004 , DE0005408116
HeidelbergCement: Boring but solid
When you build, you need building materials. As the third-largest building materials group, HeidelbergCement is a safe bet. Above all, the Company is not exclusively dependent on developments in Germany but benefits from the global trend. In addition to a solid revenue share of just over 40% in Europe, HeidelbergCement also does business in North America (around 25%) and Asia-Africa (26%). The Company came under pressure in 2020 because of the pandemic and even conceded its long-term outlook. Development in the USA and Asia shows that at least the construction industry got back on track towards the end of the year.
HeidelbergCement's share price today is roughly where it was a year ago. In the meantime, investors have had many opportunities to buy up at favourable prices. For example, if you consider that housing is still in short supply in many metropolitan regions, the outlook for the building materials group from Heidelberg should not be so bad. The trend towards sustainability and the lavish cash injections should also benefit the real estate markets. With the crisis in its home stretch, investors can look at HeidelbergCement. The business is diversified globally and the stock is tradable daily. These qualities alone make it stand out from concrete gold.
Pollux Properties: Real estate in Asia's Switzerland
Not to be compared with the somewhat conservative global conglomerate HeidelbergCement is the real estate company Pollux Properties, from Singapore. The Company invests in real estate and operates as a real estate developer. In total, the Company manages assets worth just under SGD 390 million. These include residential properties but also office buildings or space for retailers. In 2020, Pollux Properties generated revenues of just under SGD 15 million and EBITDA of SGD 7.7 million. Compared to the previous year, earnings increased by a whopping 46%. As the Company states, they also have more than SGD 30 million in cash. On the stock market, Pollux is currently valued at around SGD 90 million.
Although the share does not catch the eye of many investors at first glance, due to its existence as a penny stock, the value could prove to be promising under certain circumstances. Pollux Properties operates in Singapore and thus benefits from the island state's boom as a hub for the whole of Asia. The city-state is already considered one of the world's wealthiest countries and is often referred to as the Switzerland of Asia. It seems unlikely that the positive development there will ever come to an end - after all, building land and attractive real estate, in particular, are rare. While the share is currently trending sideways in Singapore and Frankfurt, investors can take a closer look at the Company - Pollux Properties is still not very well known.
Aareal Bank: Good name, healthy dividend
Whenever properties change hands, brokers - and banks - rejoice. Aareal Bank is considered a specialist in property financing. In the first half of 2020, the Company made a name for itself with low figures. Due to the pandemic, the Company had to manage risk, which caused profits to melt away. In the meantime, the share price has recovered somewhat, but it is still down just over 30% over the course of a year. Since Aareal Bank operates globally and has a good name in the industry, it should return to growth after the crisis. Those who think long-term can also consider the share thanks to the dividend yield of around 4.9%.
From a chart perspective, the EUR 20 mark could point the way ahead. If the share stabilizes above it, the sideways trend could turn into a flat upward trend. Below EUR 20, on the other hand, there is a risk of a decline towards EUR 15. Even though Aareal Bank and other stocks from the property sector are currently of little interest to short-term investors, the stocks are potential stragglers. Particularly in smaller stocks, such as Pollux, decisions at the corporate level have a more significant impact and can lead to a revaluation even if the overall market is weakening.