ÖKOWORLD — Strong 2016 results lead to dividend hike

Private: ÖKOWORLD (VVV3)

Last close As at 18/04/2024

74.60

1.20 (1.63%)

Market capitalisation

228m

More on this equity

Research: Financials

ÖKOWORLD — Strong 2016 results lead to dividend hike

ÖKOWORLD (ÖWAG) reported strong 2016 results. The operating business environment was challenging, mainly due to high volatility in the relevant SRI financial market segment, but the group’s net earnings were strong, boosted by €3.6m in dividend income from its holdings in subsidiaries. These more than compensated for a €2.9m decline in performance fee income. Cost cuts of €600k also contributed to a €1.6m increase in net profits to €4.6m. ÖWAG increased the dividend to 51 cents (+13%).

Analyst avatar placeholder

Written by

Ralf Goenemba

Financials

ÖKOWORLD

Strong 2016 results lead to dividend hike

Asset management

Scale research report - Update

16 June 2017

Price

€12.38

Market cap*

€101m

*Market cap. based on 8.15m shares issued, but only 3.95m preference shares listed on the stock market.

Share price graph

Share details

Code

VVV3.GY/VVVGn.p.DE

Listing

Deutsche Börse Scale

Shares in issue

3.95m

Last reported net cash as at 31 December 2016

€3.7m

Business description

ÖKOWORLD is the listed holding company for asset management, insurance brokerage and advisory services. It is one of Germany’s pioneers in SRI and ethical-ecological investment advisory, with its nucleus reaching back to 1975. It preserved its successful core investment principles and reached €925m AUM in March 2017.

Bull

A strong brand with established distribution channels and constant AUM growth.

SRI investments become mainstream with more companies following SRI rules.

Cost cuts and participation boost net profits.

Bear

Despite long history still relatively low AUM.

Strong dependency on German market.

Only preference shares available to investors.

Analyst

Ralf Groenemeyer

+44 (0)20 3077 5700

ÖKOWORLD (ÖWAG) reported strong 2016 results. The operating business environment was challenging, mainly due to high volatility in the relevant SRI financial market segment, but the group’s net earnings were strong, boosted by €3.6m in dividend income from its holdings in subsidiaries. These more than compensated for a €2.9m decline in performance fee income. Cost cuts of €600k also contributed to a €1.6m increase in net profits to €4.6m. ÖWAG increased the dividend to 51 cents (+13%).

Participation income saves 2016 results

Overall, revenues slipped 27% to €9.2m, leading to a 44% decline in gross profits to €4.7m. EBITDA fell by 64% to €1.7m. Although personnel costs were cut by €600k, this did not compensate for the decline. However, first time dividends paid by the subsidiaries versiko (€750K) and Ökoworld Lux SA (€2.8m) resulted in an 11% increase in pre-tax profits to €5.1m, while a lower tax rate (dividends are taxed at a lower rate than operating income) boosted net profits by 35%.

Performance fee income remains an issue

While the main fund (c 70% of AUM) Ökoworld Classic ended the year with a positive performance of 3.37%, other ÖWAG funds closed the year slightly lower. The ‘Garant 20’ fund will no longer be actively offered. In particular, the election of US President Donald Trump and his anti-environmental approach (eg leaving the Paris climate accord) could have a negative effect on funds such as ÖWAG that are run under strict SRI principles.

Positive newsflow in 2017

SRI is gaining acceptance in the German institutional landscape: a nationwide index by Stuttgart University and UNION measuring the acceptance of SRI criteria gained 10pp to 19.4 points in 2017. This should boost AUM for ÖWAG, which were up 10% vs year end 2016 to €925m by the end of March largely due to better fund performance. In addition, a newly introduced ‘follow-up’ premium in insurance business should lead to rising insurance premium income.

Valuation: Share price moderately higher

Year to date, ÖWAG shares are modestly higher. In addition, it has a dividend yield of 4.1%. Dividend income from subsidiaries tends to reduce the year-on-year volatility of net income.

Historical financials

Year
end

Revenue
(€m)

PBT
(€m)

EPS
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/13

9.2

2.3

0.30

0.36

41.3

2.9

12/14

10.3

3.7

0.42

0.40

29.5

3.2

12/15

12.7

4.6

0.44

0.45

28.1

3.6

12/16

9.2

5.2

0.60

0.51

20.6

4.1

Source: ÖKOWORLD accounts, Bloomberg

Edison Investment Research provides qualitative research coverage on companies in the Deutsche Börse Scale segment in accordance with section 36 subsection 3 of the General Terms and Conditions of Deutsche Börse AG for the Regulated Unofficial Market (Freiverkehr) on Frankfurter Wertpapierbörse (as of 1 March 2017). Two to three research reports will be produced per year. Research reports do not contain Edison analyst financial forecasts.

Financials: FY16 results released

The 2016 balance sheet shows little change from the previous year. Non-current assets remained at c €8m, of which €7.1m is stakes in subsidiaries, in particular the operating insurance broker versiko and the Luxembourg based fund subsidiaries, which paid relatively high dividends to ÖWAG in 2016. On the current asset side, ÖWAG was able to reduce receivables by more than 50% to €2.2m. Another positive effect from the dividend payments is a 37% increase in cash to €8.8m. Cash therewith represents 44% of the balance sheet total, up from 32% in 2015.

Equity rose 9.5% to €14.5m in 2016, equal to 73% of the balance sheet total, largely due to higher profits in the year. Liabilities remained at 2015 levels, mainly comprising pension accruals, which increased by €70k to €3.3m (65% of total liabilities). The strong increase in cash and the stabilisation of debt resulted in a net cash position by the end of 2016 of €3.7m (€828k in 2015).

On the P&L side, market volatility resulted in a €2.9m (-85%) decline in performance fee income, which resulted in revenues falling from €12.7m in 2015 to €9.2m in 2016. ÖWAG’s funds only generate a performance fee for ÖWAG if they pass the previous highest price level (high watermark). After a difficult start to the year (H116 revenues €3.95m, -48% y-o-y, net profits €1.59m, -37% y-o-y), cost cuts and the dividend payments pushed net profits to €4.6m. Excluding the dividend income, pure net operating profits were a third of last year’s net results of €3.4m, assuming a tax rate equal to 2015, ie 26%.

While the flagship fund ‘Ökoworld Classic’ ended the year with a positive performance (+3.37%), other funds did not, leading to the decline in earned performance fees. Also ‘other income’ declined by more than €1m, chiefly as the 2015 position (€1.3m) contained €0.8m in income from an asset sale. A €600k decline in salaries as part of ÖWAG’s optimisation efforts failed to compensate for the decline in overall revenues. Consequently, EBIT fell from €4.7m in 2015 to €1.6m in 2016. The main earnings driver for ÖWAG was the emergence of dividend payments from versiko and Ökoworld Lux SA: here, ÖKÖ recorded dividend income of €3.6m vs zero in 2015. This led to an 11% increase in pre-tax profits to €5.2m. ÖWAG will increase the dividend per listed preference share to €0.51 (€0.45).

Exhibit 1: Financial summary

 

€000s

2011

2012

2013

2014

2015

2016

Year end 31 December

 

HGB

HGB

HGB

HGB

HGB

HGB

Income statement

 

 

 

 

 

 

 

Revenue

 

8,171

8,115

9,229

10,324

12,687

9,222

Profit Before Tax (as reported)

1,545

2,092

2,342

3,743

4,635

5,151

Net income (as reported)

 

1,547

2,096

2,311

3,260

3,419

4,620

 

 

 

 

 

 

 

 

EPS (as reported) – (€)

 

0.19

0.27

0.30

0.42

0.44

0.60

Dividend per pref share (€)

 

0.27

0.36

0.36

0.40

0.45

0.51

 

 

 

 

 

 

 

 

Balance sheet

 

 

 

 

 

 

 

Total non-current assets

 

8,139

9,298

9,050

9,236

7,907

7,694

Total current assets

 

10,213

8,285

8,051

9,738

11,607

12,083

Total assets

 

18,371

17,610

17,115

19,004

19,555

19,806

Total non-current liabilities

 

4,052

4,086

3,402

4,158

5,017

4,595

Total current liabilities

 

1000

942

1258

1367

561

501

Total liabilities

 

5,052

5,028

4,660

5,525

5,578

5,096

Net assets

 

13,319

12,582

12,455

13,479

13,977

14,710

 

 

 

 

 

 

 

 

Shareholders’ equity

 

13,319

12,582

12,420

13,314

13,807

14,542

Cash flow statement

 

Net cash from operating activities

 

1,332

2,913

2,433

3,563

5,404

2,595

Net cash from investing activities

 

-208

-762

3

-336

1,942

3,664

Net cash from financing activities

 

-369

-2,833

-2,474

-2,365

-2,926

-3,884

Net cash flow

 

755

-682

-38

862

4,420

2,375

Cash & cash equivalent end of year

 

1,844

1,162

1,124

1,986

6,406

8,781

Source: ÖWAG annual reports 2011-16. Note: HGB = German GAAP.

Valuation

ÖWAG’s market cap is c €101m and its enterprise value (EV) is c €97m. The company has >€900m in assets under management (AUM) and achieved an ROE of 32% in 2016. Based on 2016 EPS, ÖWAG trades at a P/E of c 20x, around 30% below the sector average of 30.4x (source: Reuters, sector: Investment Management & Fund Operators as of 30 May 2017). Also, ÖWAG’s dividend yield of 4.1% is above the sector average of 2.2%.

We believe that the valuation of the company reflects the fact that the listed shares are non-voting preference shares, while the non-listed voting stock is in the hand of the management and selected employees. Peer group shares are mostly voting stock.

ÖWAG’s potential stream of dividend income from its subsidiaries helps to smooth out volatile revenues from performance fees, which leaves the net income line relatively stable. These dividends are based on the decisions of the AGMs of the subsidiaries during ÖWAG’s business year – where ÖWAG holds the majority. The ability to smooth its income stream appears not be fully reflected in the share price.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisors and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Any Information, data, analysis and opinions contained in this report do not constitute investment advice by Deutsche Börse AG or the Frankfurter Wertpapierbörse. Any investment decision should be solely based on a securities offering document or another document containing all information required to make such an investment decision, including risk factors.

Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Deutsche Börse AG and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

More on Private: ÖKOWORLD

View All

Latest from the Financials sector

View All Financials content

Angle — A boost for prostate cancer indication

Yesterday Angle announced that researchers from Queen Mary University of London’s Barts Cancer Institute (BCI) published new data further supporting Angle’s Parsortix system for use in prostate cancer applications including an unexpected fundamental discovery that might ignite interest as a new research area in cancer metastasis. The study analysed blood samples from 81 prostate cancer patients and showed that Parsortix captured so-called EMTing cancer cells, those circulating tumour cells (CTCs) that are undergoing epithelial to mesenchymal transition. EMTing cells were correlated with whether the cancer became metastatic. Namely, the researchers found that EMTing cells combined with the gold standard PSA test had 92% accuracy in predicting metastasis, significantly outperforming PSA alone. The ability to capture EMTing and EMTed cells is what differentiates Parsortix from many other liquid biopsy systems. We are updating our estimates.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free