April 27th, 2022 | 12:13 CEST
Hong Lai Huat, Commerzbank, Vonovia - Go for intrinsic values!
Table of contents:
Hong Lai Huat - Exotic yield turbo
Hong Lai Huat Group Limited has been active as a real estate developer and builder in Singapore since 1998. Over the past decades, the Group has completed numerous projects in the city-state, ranging from public and private residential developments to commercial and industrial buildings.
The island state is also the corporate headquarters. Singapore has top-class marks in terms of quality of life, security and economic performance. The homeownership rate is a good 90%. Singapore is also one of the world's most important financial centers and a major shipping hub in Asia.
In 2008, the Group diversified into the agricultural sector in Cambodia and has since completed the development of approximately 10,000 hectares of farmland growing fresh cassava. The Group has also expanded its real estate development in Cambodia with the successful launch of its first mixed-use condominium project, D'Seaview.
D'Seaview comprises 737 residential and 67 commercial units. In the past fiscal year, a strong pick-up in property sales from Cambodia led to a doubling of sales. Shareholders benefit through a dividend payout.
The stock is still relatively undiscovered. At SGD 49 million, the equivalent of EUR 33 million, the stock's market value is also moderate given the good prospects. Investors should keep an eye on the stock in view of rising earnings.
Vonovia - Intrinsic value with a good dividend yield
Vonovia is one of the leading real estate companies in Europe and the largest private housing company in the German market. The Bochum-based Group has grown in recent years through numerous acquisitions. The Company has been listed on the DAX since 2015. Vonovia manages around 565,000 apartments. The strategic business areas comprise the purchase of apartments, long-term and value-enhancing management and socially responsible privatization. The market value of the real estate portfolio was around EUR 98 billion at the end of 2021.
The Company is currently valued at EUR 31 billion on the stock market. In the past fiscal year, the Bochum-based Company generated earnings of EUR 4.22 per share. The Executive Board and Supervisory Board have proposed a dividend of EUR 1.66 per share to the Annual General Meeting on April 29, representing a good 4% dividend yield. The share price decline of almost 25% over the last 12 months has recently been used by members of the Executive Board to make acquisitions. With an equity ratio of 34.4% and an intrinsic value per share of EUR 66.73, the Group's balance sheet looks extremely solid.
Real estate investors are currently focusing on two key developments: interest rates and inflation. While interest rates are expected to rise moderately, much stronger increases can be observed concerning inflation. However, this does not have to be negative for landlords, provided that index leases, which are based on the consumer price index of the Federal Statistical Office, have been concluded.
The German Tenants' Association president, Lukas Siebenkotten, recently told the Deutsche Presse-Agentur: "The number of such rental agreements is increasing, especially recently." Siebenkotten went on to say, "We have feedback from tenants' associations like in Hamburg that up to half of all leases being signed right now are index or graduated leases." Thus, the general conditions for real estate portfolio holders remain favorable.
Commerzbank - Recession fears
Recession fears are weighing particularly heavily on cyclical sectors such as banks and insurers. Although in principle rising interest rates positively impact financial stocks, concerns about a sharp rise in inflation and significant cooling of the economy currently predominate. A surprisingly strong ifo Business Climate Index failed to excite the markets. That and the ongoing disputes over bank charges are currently weighing on the Commerzbank share.
The Federal Court of Justice ruled a year ago that banks must obtain the consent of their customers when making changes to general terms and conditions. As a result, banks must subsequently ask for consent to current fees. Bank customers can reclaim fees that institutions have charged without explicit consent. It could be expensive for financial institutions.
Substantial real estate companies continue to offer good investment opportunities. If you want to invest in the leading national player in Germany, Vonovia is a good choice because of its attractive dividend yield. Hong Lai Huat is worth a closer look for those looking for higher yields outside the mainstream in an exciting growth market. Sentiment for bank stocks is currently negative - wait and see.
Conflict of interest
Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.
In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.
For this reason, there is a concrete conflict of interest.
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