ÖKOWORLD — Growing interest in its offering

Private: ÖKOWORLD (VVV3)

Last close As at 20/11/2024

74.60

1.20 (1.63%)

Market capitalisation

228m

More on this equity

Research: Financials

ÖKOWORLD — Growing interest in its offering

ÖKOWORLD (ÖWAG) posted solid H120 results, which we believe may reflect, among other things, improving interest in its insurance brokerage business focused on pension products. Entering 2020, assets under management (AUM) of its fund managing subsidiary ÖKOWORLD LUX amounted to c €1.7bn then expanded to almost €2.0bn at end July 2020. While this has driven growth in its management fees, we assume the subsidiary earned limited (if any) performance fees in H120, as funds exceeded previous high-water marks for a short time only before the pandemic outbreak. However, we note that on the back of the strong rebound in broad equity markets in Q220, the fund performance recovered from the initial downturn in late Q120.

Milosz Papst

Written by

Milosz Papst

Head of Content, Investment Trusts

Financials

ÖKOWORLD

Growing interest in its offering

Diversified financials

Scale research report - Update

16 September 2020

Price

€24.4

Market cap*

€172m

*Based on 7.06m total shares issued (after deducting treasury shares). Only 3.05m non-voting preference shares are listed on the stock market.

Share price graph

Share details

Code

VVV3

Listing

Deutsche Börse Scale

Shares in issue

3.05m

Last reported net cash at 30 June 2020

€24.5m

Business description

ÖKOWORLD Group’s business is focused on asset management, insurance brokerage and advisory services. It is one of Germany's pioneers in socially responsible investing (SRI) and ethical-ecological investment advice and was founded in 1975. It preserved its successful core investment principles and reached AUM of c €2.0bn at end July 2020.

Bull

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

SRI investments have become mainstream with more companies following SRI rules.

Proven track record and numerous awards.

Bear

Despite its long history, still relatively low AUM.

Only preference shares available to investors.

Strong dependency on German customers.

Analysts

Milosz Papst

+44 (0)20 3077 5700

Michal Mierzwiak

+44 (0)20 3077 5700

ÖKOWORLD (ÖWAG) posted solid H120 results, which we believe may reflect, among other things, improving interest in its insurance brokerage business focused on pension products. Entering 2020, assets under management (AUM) of its fund managing subsidiary ÖKOWORLD LUX amounted to c €1.7bn then expanded to almost €2.0bn at end July 2020. While this has driven growth in its management fees, we assume the subsidiary earned limited (if any) performance fees in H120, as funds exceeded previous high-water marks for a short time only before the pandemic outbreak. However, we note that on the back of the strong rebound in broad equity markets in Q220, the fund performance recovered from the initial downturn in late Q120.

Significant improvement in net profit

In H120, ÖWAG reported net profit of €7.4m against €2.5m in H119. The increase was likely driven by strong insurance brokerage business and the dividend of €4.9m (vs €2.4m in H119) from ÖKOWORLD LUX. Furthermore, personnel expenses in the period decreased by 47.3% y-o-y to €1.5m, which is largely attributable to the high comparative base in H119 (€2.8m), inflated by reorganisation costs and performance bonuses.

Funds reporting positive returns in 2020

Healthy returns over the three-month period ending 31 July 2020, reported by all funds managed by ÖKOWORLD LUX, helped offset Q120 losses. The largest fund in the portfolio, ÖKOWORLD ÖKOVISION CLASSIC (c 72% of overall AUM), has already reported a positive year to date performance, reaching 3.4% at end July 2020. Meanwhile, the best performing fund, ÖKOWORLD KLIMA, recorded a c 18.5% ytd return and increased its AUM from €150.6m at the beginning of the year to €258.4m at 31 July 2020.

Valuation: Setting new record-high share price

Although ÖWAG’s share price is currently at a record-high level, the valuation against its peers, based on the last 12-month P/E multiple, indicates a c 20% discount. Based on the market cap to last reported funds AUM ratio, ÖWAG is trading 4.1pp above the peer group median, which may reflect its solid insurance brokerage business. ÖWAG currently offers a dividend yield of 2.5%.

Historical financials

Year
end

Revenue
(€m)

PBT
(€m)

EPS
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/16

9.2

5.2

0.60

0.51

40.7

2.1

12/17

15.8

9.7

1.02

0.60

23.9

2.5

12/18

15.3

5.1

0.50

0.40

48.8

1.6

12/19

20.3

13.5

1.54

0.61

15.8

2.5

Source: ÖKOWORLD accounts

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: Further expansion of AUM

With interest rates remaining stable at a record-low level over H120, investment funds have gained in significance as an investment opportunity for individuals looking for a reasonable risk-return tradeoff. ÖKOWORLD LUX is clearly benefiting from this trend, further assisted by strong sentiment towards sustainable investments. Its AUM has made steady progress through the year to date, with July volume of nearly €2bn (vs €1.7bn at 31 December 2019 and more than €1.3bn at 30 June 2019), likely driving improved management fees. The company has not disclosed detailed information regarding the performance fee. We note, however, all five funds managed by ÖKOWORLD LUX (the fund management subsidiary) reached new records in terms of unit price over the analysed period and the previous high-water marks were exceeded for a short time only before the pandemic. We also note that performance fee (if any) earned in H119 was limited.

We believe that the 29.4% y-o-y improvement in revenues, which reached €9.5m in H120 (vs €7.3m in H119), may be mainly attributable to improved fund fee income and strong insurance brokerage business (focused on pension products). However, we note that management fees earned by ÖWAG (which are charged by ÖKOWORLD LUX as a percentage of AUM and partially transferred to the parent company) are largely passed on to distributors, with the higher fees paid in H120 resulting in costs of services growing from €2.5m in H119 to €3.3m in H120. Over the first six months of 2020, ÖWAG recognised €4.86m in income from related companies in the form of dividends from ÖKOWORLD LUX against €2.43m in H119. However, management indicates this dividend was partly paid from previous period retained earnings.

Over the same period, personnel expenses fell from €2.8m to €1.5m. However, we note that in FY19 company incurred some reorganisation costs and paid performance bonuses to its staff. H120 personnel costs are on a par with the H118 total of €1.4m.

Exhibit 1: Financial highlights

€000s

H120

H119

y-o-y

Revenues

9,497

7,340

29.4%

Other operating income

43

43

0.9%

Costs of services

(3,345)

(2,470)

35.4%

Personnel expenses

(1,453)

(2,756)

-47.3%

Other operating expenses

(943)

(969)

-2.7%

D&A

(56)

(88)

-36.3%

Income from related companies

4,860

2,430

100.0%

EBIT

8,603

3,529

143.7%

EBIT margin

90.6%

48.1%

42.5pp

Other interest and similar income

0

1

-66.2%

Interest and similar expenses

(45)

(11)

307.8%

EBT

8,558

3,519

143.2%

EBT margin

90.1%

47.9%

42.2pp

Income tax

(1,118)

(1,064)

5.0%

Effective tax rate

13.1%

30.2%

-17.2pp

Net profit for the period

7,440

2,455

203.0%

Net income margin

78.3%

33.5%

44.9pp

Source: ÖKOWORLD accounts, Edison Investment Research

As the company has a net cash position (€24.5m at end June 2020), both interest income and expenses have an insignificant impact on its results. EBT is on a par with EBIT at c €8.6m in H120 (€3.5m in H119), translating into an EBT margin of more than 90%. Assisted by an effective tax rate reduction from 30.2% to 13.1%, ÖWAG reported a threefold improvement in net profit, which reached €7.4m in H120 vs €2.5m in H119.

Funds rebounding from coronavirus downturn

Based on the last available data, as at 31 July 2020, ÖWAG recorded a 19.3% ytd increase in AUM to €1.97bn from €1.65bn as at 31 December 2019. As the weighted average rate of return over the period for all five funds managed by ÖKOWORLD LUX stood at c 5% (according to our calculations), the increase is largely attributable to net capital inflows. However, we note that the strong rebound in the broad equity market in Q220 (MSCI World Index improving by 18.8% in the period) assisted expansion, as AUM increased by 17.5% over the last three months alone from €1.68bn at end April 2020. We also note that due to the pandemic-induced sell-off in March, the strong 2019 returns may be hard to replicate in 2020. Nevertheless, we note that ÖKOWORLD ÖKOVISION CLASSIC has already returned to its February 2020 peak, while ÖKOWORLD KLIMA visibly surpassed its previous peak.

Exhibit 2: Funds performance since 1 January 2020 (rebased)

Source: Refinitiv

The largest share of overall assets (sitting at c 72%) is still attributable to ÖKOWORLD ÖKOVISION CLASSIC, with the overall volume exceeding €1.41bn. The fund reported a healthy 3.4% ytd return, with 6.4% generated over the last three months. To benefit from attractive market valuations following the March downturn, the fund improved its investment volume by reducing cash holdings from c 14.5% at end April 2020 to 8.5% at end July 2020. Its key investment areas include demography and medicine (19.6% share), information and communication (16%) and energy efficiency (13.3%), all of which seem relatively resilient to the impact of the pandemic.

ÖKOWORLD KLIMA is the second largest and best performing fund in the portfolio at end July 2020, with a ytd return of 18.5% and AUM expanding to €258m from €151m at the beginning of 2020. It is worth noting that it was also the best performing fund in 2019, with a 37.1% annual return rate. The fund successfully deployed its cash position from 12.3% of the portfolio value at end April 2020 to just 1.3% three months later. According to the latest available data, at end July 2020 the share of holdings denominated in US dollars sits at 50.7%. The key investment areas include businesses focused on adaptation to climate change (23.1%), and on energy and resource-saving products and services (19.3% and 19.2% respectively).

Exhibit 3: Summary of funds statistics

Fund name

Ytd performance

FY19 performance

AUM 31.07.2020 (€m)

% of AUM

AUM 31.12.2019 (€m)

% of AUM

ÖKOWORLD ÖKOVISION CLASSIC

3.4%

25.9%

1,412.0

71.7%

1,218.1

73.8%

ÖKOWORLD KLIMA

18.5%

37.1%

258.4

13.1%

150.6

9.1%

Ökoworld Rock'n'Roll

-0.6%

22.7%

149.8

7.6%

120.8

7.3%

ÖkoWorld Growing Markets 2.0

7.1%

27.6%

116.9

5.9%

131.5

8.0%

ÖkoWorld Water for Life

-7.1%

31.9%

31.7

1.6%

29.8

1.8%

Total:

1,968.9

1,650.8

Source: ÖKOWORLD, Edison Investment Research

The uncertainties associated with the pandemic outbreak hit ÖkoWorld Growing Markets 2.0 the most, due to its relatively higher-risk profile resulting from significant exposure to developing economies. Consequently, between end December 2019 and end April 2020, the fund reported a 9.3% loss, coupled with a c 24% decline in AUM to just €100m. Having said that, over the last three months the fund posted an c 18.5% return, bringing the ytd total to 7.1%. The two remaining funds, Ökoworld Rock'n'Roll and ÖkoWorld Water for Life, have not yet fully rebounded from the March downturn, posting 0.6% and 7.1% ytd losses, respectively at end July 2020. However, we note that both expanded their AUM over the period by 24% and 7% respectively.

Valuation

We continue to compare ÖWAG with a group of European asset managers in the equities space for valuation purposes. As Refinitiv consensus is not available for the company, we have used reported earnings calculated for the last 12-month period, which implies a c 20% discount to median of peers’ figures. We note, however, that company’s earnings also reflect significant dividend income booked in H120. Looking at the market capitalisation to total funds’ assets under management ratio, ÖWAG is trading at premium to its peers. However, this ratio does not capture ÖWAG’s insurance and investment funds brokerage business. The company’s share price is reaching record-high levels, which results in a dividend yield of 2.5%, trailing the peer group median by 3.6pp.

Exhibit 4: Peer group valuation

Market
cap (LCYm)

Market cap/AUM (%)
(last reported)

P/E (x)

Dividend yield (%)

H120 LTM

2020e

2021e

2019

2020e

2021e

Ashmore Group

£2,692

4.3

14.8

14.7

15.4

4.4

4.5

4.5

Azimut Holding

€2,354

5.7

13.5

9.9

10.2

6.1

6.3

6.7

Jupiter Fund Management

£1,141

2.9

9.0

10.0

9.1

8.3

8.2

8.3

Man Group

$1,728

1.6

9.9

12.4

9.3

6.5

5.9

5.9

Impax Environmental Markets

£649

3.4

37.3

41.7

32.1

1.1

1.3

1.7

Peer group median

-

3.4

13.5

12.4

10.2

6.1

5.9

5.9

ÖKOWORLD

€172

8.7

10.8

N/A

N/A

2.5

N/A

N/A

Discount/premium to peers

-

5.3pp

(20%)

N/A

N/A

(3.6pp)

N/A

N/A

Source: ÖKOWORLD accounts, Refinitiv data at 15 September 2020.

General disclaimer and copyright

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. This report has been commissioned by Deutsche Börse AG and prepared and issued by Edison for publication globally.

Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

More on Private: ÖKOWORLD

View All

Latest from the Financials sector

View All Financials content

Research: Consumer

OPAP — Caution following ‘encouraging’ recovery

OPAP’s Q220 results were heavily affected by the COVID-19 closures, with a revenue (GGR) decline of 53.2%. As expected, costs were well managed so that EBITDA profitability was restored by the end of the period and free cash flow generation improved on a relative basis. Post lockdown, the overall recovery was described as ‘encouraging’, but management reiterates a cautious outlook for the rest of the year given the macroeconomic uncertainties and re-emergence of COVID-19 in parts of the country. We make small changes to our assumptions, which result in similar EBITDA for FY20 to before and a modest downgrade of 3% in FY21. Our DCF continues to suggest a value of at least €9.5/share.

Continue Reading

Subscribe to Edison

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

Sign up for free