London, UK, 21 July 2017

Edison issues initiation on DEMIRE (DMRE)

DEMIRE Deutsche Mittelstand Real Estate (DMRE) is an investor in German commercial property focused on secondary locations. It has grown significantly over the last two years and has a portfolio valued at EUR984m with annual contracted rental income of EUR71.7m (31 March 2017). Further efficiency gains as acquisitions are integrated are likely to increase profitability and provide a stable platform for further growth. A diverse portfolio of income streams and potential for capital growth may make this an attractive way to access the German property market at a discount.

Rapid NAV and FFO growth in 2015 was reflected in the share price movement that year, but in 2016 the shares moved sideways. While it trades above the peer average price/FFO ratio, DEMIRE is at a considerable discount to EPRA NAV/share of EUR4.61 at 31 March 2017 (c 20% vs a peer average of a 3% premium). As the company comes out of this phase of investment in rapid growth, and acquisitions and restructuring make a full contribution, there is scope for the discount to narrow. In addition, the achievement of the long-term aim of paying a dividend could be a catalyst for the share price too, although this is not expected in FY17.

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