London, UK, 15 October 2020

Borussia Dortmund (BVB): Another brick in the yellow wall

The 2019/20 season was typically successful from a sporting perspective, which reaffirmed Borussia Dortmund's position as one of the leading football teams in Germany and Europe. The coming year is likely to be more challenging financially due to the operating restrictions necessitated by COVID-19, but the company is well-placed to deliver a strong recovery in earnings if restrictions ease, albeit visibility on these is limited. The valuation reflects the uncertain outlook as it is trading at a significant (166%) discount to our sum-of the-parts valuation, broadly in-line with historic sales multiples, and at a discount to its peers.

The share price has been weak since the outbreak of COVID-19. Our asset-backed valuation of €13.03, which takes into account unrealised value in the playing squad and brand, points to upside of 166% to the current share price. The share price attributes a lower value to the brand and the playing squad, which likely reflects the uncertain outlook for revenue and profitability given the high level of operational leverage. The EV/sales multiple of 1.4x is in line with the long-run average, and at a discount to its peers.

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