Deutsche Beteiligungs AG - DBAG-Website€¦ · Deutsche Beteiligungs AG (SDAX, Financial Services)...

Deutsche Beteiligungs AG (SDAX, Financial Services)

A n a l y s t

Eggert Kuls [email protected]

+49 40 309537-256

NO T E Published 10.09.2018 08:15 1

RESEARCH

Buy

EUR 44.00 (EUR 45.00)

Price EUR 36.45

Upside 20.7 %

Value Indicators: EUR Share data: Description:

SotP 20e: 43.92

Bloomberg: DBAN GR

Reuters: DBANn.DE

ISIN: DE000A1TNUT7

Private equity both as an advisor and as a co-investor focused on the German Mittelstand

Market Snapshot: EUR m Shareholders: Risk Profile (WRe): 2017/18e

Market cap: 548

No. of shares (m): 15

EV: 433

Freefloat MC: 449

Ø Trad. Vol. (30d): 904.77 th

Freefloat 81.9 %

Family offices 18.1 %

Beta: 1.0

Price / Book: 1.2 x

Equity Ratio: 95 %

After a year of transition, results expected to improve going forward

� A change in DBAG’s accounting methodology with the release of Q3 2017/18 results led to a second reduction in the guidance for fiscal

2017/18 (ends 30.09). The changes arise from the timing of the recognition of carried interest in the P&L and were prompted by the German

financial supervisory authority, BaFin. Carried interest is now recognized earlier, in compliance with IFRS accounting standards. The

adjustments affect the net result of investment activity, financial assets and equity. Previous periods are only comparable to a limited extent

as the changes were applied to the current year and previous year only.

� Q3 and 9M figures were far lower than the previous year’s adjusted figures, mainly because of the exceptional performance in the year-earlier

period when DBAG divested, or agreed to divest, six companies (out of 27 in total) for prices exceeding the valuation at the beginning of the

fiscal year, which led to exceptionally high earnings contributions. Rising stock market multiples had a positive impact on the valuation of the

portfolio. This year results were far lower, in the absence of major earnings from divestments and a more or less neutral stock market impact

on portfolio valuation. Nevertheless, the mostly positive operating performance of the portfolio companies had a positive impact on the net

result from investment activity.

� DBAG is likely to book the divestment of Cleanpart Group to Mitsubishi Chemicals Crop. in either Q4 2017/18 or Q1 of the next fiscal year.

The DBAG Fund VI will also sell its stake. Contracts have been signed pending antitrust approval. As the negotiated selling price exceeds the

valuation of Cleanpart as of June 2018, the divestment will have a positive impact on DBAG’s Q4 results but the current guidance already

takes this into account.

� Generally the result of a single period is very difficult to predict and depends mainly on the operating development of the portfolio companies,

multiples paid for companies on the stock market (which are used to evaluate the portfolio) and successful divestments. As DBAG keeps its

investments in the portfolio for four to seven years, the result over a five-year period is a far better reflection of management performance

than a single year. This is also reflected in the company’s guidance which takes a five-year net result average as a reference base.

� DBAG’s investment team of more than 25 managers has more than 200 years of combined experience in the private equity market and a

broad and influential network in Germany and globally. In its half a century of business activity, DBAG has become a well-known brand

among German Mittelstand companies. Noteworthy is the company’s risk-minimising approach, which makes it obligatory for the

management team to place a private investment. This results in a risk-averse investment philosophy and reduced principal-agency costs. On

the basis of this knowledge and experience, DBAG’s impressive track record is expected to continue in the years to come.

� Share remains a Buy. Price target, which is slightly reduced to EUR 44 (45), is derived from net asset value of private equity business as well

as DCF of fund services business based on 2020 estimates. DBAG will release FY 17/18 figures on November 30.

FY End: 30.9. in EUR m

CAGR (16/17-19/20e) 2013/14 2014/15 2015/16 2016/17 2017/18e 2018/19e 2019/20e

Net result of fund

services and

investment activity

-8.3 %

76 48 78 121 63 85 94

Net result

investment activity

55 29 60 94 34 54 62

Fee income fund

services

22 19 18 27 29 31 32

EBIT -13.8 % 48 27 50 91 35 53 58

EBT 48 27 49 90 34 52 58

Net income -13.9 % 48 27 49 90 34 52 58

EPS -13.9 % 3.51 1.98 3.60 6.01 2.27 3.46 3.83

DPS 0.0 % 2.00 1.00 1.20 1.40 1.40 1.40 1.40

Dividend Yield 9.5 % 3.6 % 4.3 % 3.8 % 3.8 % 3.8 % 3.8 %

NAV per share 22.16 22.16 26.91 29.01 29.85 31.91 34.34

Return on NAV 15.9 % 9.9 % 27.2 % 12.8 % 8.1 % 12.2 % 12.6 %

P / E 6.0 x 14.0 x 7.7 x 6.2 x 16.1 x 10.5 x 9.5 x

Net Debt -19 -20 -42 -150 -116 -84 -63

ROE 16.5 % 8.9 % 14.7 % 22.4 % 7.7 % 11.2 % 11.6 %

ROCE (NOPAT) 17.3 % 9.4 % 16.4 % 29.6 % 11.2 % 14.4 % 13.7 % Guidance: Net income >20% below five-year average of EUR 43.0m

Rel. Performance vs SDAX:

1 month: -1.3 %

6 months: -13.4 %

Year to date: -22.7 %

Trailing 12 months: -14.2 %

Company events:

Deutsche Beteiligungs AG

NO T E Publ ished 10 .09 .2018 2

RESEARCH

Net result fund services & investments in EUR m

Source: Deutsche Beteiligungs AG, Warburg Research

Portfolio by industry 2016/17; in %


Net income in EUR m


Company Background

� Deutsche Beteiligungs AG (DBAG) is a publicly-listed private equity firm sponsoring management buyouts (MBOs) and financing

expansion capital.

� DBAG’s business model is to invest its own funds (Private Equity Investments Segment) alongside funds it manages and for which it

earns fees (Fund Investment Services Segment) helping cover fixed costs.

Competitive Quality

� DBAG has a tight focus on mainly direct investments in unlisted, operationally healthy German Mittelstand companies in the

industrials and services sector with sales volumes of EUR 50m – 500m p.a.

� Differentiation is based on DBAG's long-standing track record. Since it was founded in 1965, DBAG has made more than 300 private

equity investments.

� Investors value this experience which cannot be matched by new entrants and the very solid track record of generating a 15-year

average return for shareholders above 15%.

Dividend per share in EUR


Net asset value per share in EUR




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Remains a Buy with a slightly lower price target

The share remains a Buy but the price target is reduced slightly to EUR 44 (from EUR 45). The PT is

derived from the net asset value of private equity business as well as the DCF of fund services business

based on 2020 estimates.

Accounting change from Q3 2017/18 onwards

DBAG’s accounting methodology has changed with the release of Q3 2017/18 results. Changes apply to

the net result of investment activity, financial assets and equity. DBAG will also adjust the previous year’s

figures when releasing upcoming quarterly results but the changes will apply to current and previous fiscal

year only. Previous periods are only comparable to a limited extent.

The changes were prompted by BaFin’s discovery of a violation of accounting standards in DBAG’s

consolidated financial statements with regard to “carried interest” – entitlements arising from private

investments managers made in investment subsidiaries of DBAG Fund V. In essence, the changes relate

to the timing of the recognition of the carried interest in the DBAG P&L. This must now be recognized

earlier.

Previously, the company calculated the fair value of the investment entity subsidiaries based on the

assumption that the relevant fund would continue as planned. It now calculates based on the assumption

of full liquidation. While this leads to the same result over the lifetime of an investment, the new method

means that carried interest will be booked earlier.

Future period results will benefit from the earlier booking of carried interest but the total amount of carried

interest is unaffected, as is the cash flow.

The methodology change has a negative impact of EUR 10.5m on the valuation of DBAG’s share in Fund

VI as of June 30, 2018. Under IFRS rules, when the methodology changes, previous accounts have to be

adjusted. On this basis, the valuation of Fund VI on September 30, 2017 would already have included

carried interest of EUR 8.4m. The DBAG 9M-result in 2017/18 is thus EUR 2.1m lower than under the

former method. Furthermore, the adjusted figure for the previous 9M-period is EUR 7.2m lower. This is

also the reason for the second reduction in the 2017/18 profit guidance (from previously 10–20% below

the five-year average of EUR 43m to >20% below the five-year average of EUR 43m).

Earlier this year, DBAG already reduced the initial guidance mainly because of valuation effects from

capital market multiples, which had a negative effect in H1 17/18. However, this was no longer an issue

after nine months.

2017/18 result clearly below last year’s record level and also below five-year average

Results Q3 and 9 months 2017/18

Source: Warburg Research

DBAG reported Q3 and 9M figures that were clearly below the previous year’s adjusted figures. This was

solely due to a much lower net result from investment activity. In the same period of 2016/17 DBAG

divested, or agreed to divest, six companies (out of 27 in total) for prices exceeding the valuation at the

beginning of the fiscal year, which led to an exceptionally high earnings contribution. Rising stock market

multiples also had a positive impact on the valuation of the portfolio. This year’s result was far lower owing

to the absence of major earnings from divestments and a more or less neutral impact from stock markets

on the portfolio valuation. Nevertheless, the mostly positive operating performance of the portfolio

companies had a positive impact on the net result of investment activity.

EUR m Q3 17/18 Q3 16/17 yoy 9M 17/18 9M 16/17 yoy

Net result of investment activity 9.0 27.9 -67.8% 29.3 75.6 -61.2%

Fee income of fund management and

advisory services 7.4 7.4 -1.0% 21.5 19.7 9.4%

(1) + (2) 16.4 35.4 -53.7% 50.8 95.3 -46.7%

EBT 9.6 27.3 -64.8% 29.0 71.4 -59.4%

Net income 9.6 27.3 -64.8% 28.9 71.4 -59.5%

EPS 0.64 1.81 -64.7% 1.92 4.74 -59.5%



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Fee income from fund management and advisory services was up by more than 9% yoy to EUR 21.5m in

the first nine months of fiscal 2017/18. The increase is attributable to higher income from DBAG Fund VII

which contributed EUR 12.1m, up from EUR 8.5m in the previous year’s period and DBAG ECF (EUR

1.7m, up from EUR 0.3m).

DBAG will book the divestment of Cleanpart Group to Mitsubishi Chemicals Corp. in either Q4 2017/18 or

Q1 of the next fiscal year. DBAG Fund VI will sell its investment too. Contracts have already been signed

and the deal is pending the approval of cartel authorities. As the negotiated selling price exceeds the

valuation of Cleanpart as of June 2018, the divestment will have a positive impact on DBAG’s Q4 results.

As DBAG had already assumed a positive impact from the divestment of Cleanpart in its guidance, no

additional adjustment is necessary.

Generally, the result of a single period is very difficult to predict and depends mainly on the operating

development of the portfolio companies, multiples paid for companies on the stock market (which are used

to evaluate the portfolio) and successful divestments. As DBAG keeps its investments in the portfolio for

an average of four to seven years, the result over a five-year period is a far better reflection of the

management performance than over a single year. This is also reflected in the company guidance which

takes a five-year net result average as a reference base.

Private equity investments: portfolio changes in the current FY

In the first nine months of FY 2017/18, DBAG made investments in five companies, four together with the

DBAG ECF and the fifth together with DBAG Fund VII. All five transactions are MBOs. DBAG (together

with DBAG ECF or DBAG Fund VII) acquired the majority stake in these companies in all five cases.

DBAG ECF acquisitions:

� Sjolund A/S: Sjolund is the biggest provider of complex bent aluminum and steel components. The

company produces components for the nacelles of wind turbines and supplies train manufacturers with

structural profiles and components for external cladding. The company also addresses the construction

and mechanical engineering industries. DBAG co-invested EUR 4.5m in Sjolund and holds ca. 22% of

the company.

� netzkontor nord GmbH: The company offers services around the planning and supervision of fibre-optic

network construction and handles network management for operators. netzkontor focuses on the region

of Schleswig-Holstein. DBAG invested EUR 6.5m, which corresponds to ca. 34% of the company.

� Von Poll Immobilien GmbH: The company is one of the leading broker platforms in the premium real

estate segment in the DACH region, with 280 offices in Germany and locations in nine other countries.

More than 800 brokers operate under the umbrella of the von Poll brand. DBAG will spend up to EUR

11.8m on its co-investment. Once the transaction is complete, DBAG will hold ca. 36% in von Poll

Immobilien.

� BTV Braun Telecom Gruppe: BTV is a group of retail and service companies, producing and selling

components for the construction of cable and fibre-optic networks. The group is one of only a few full-

service providers on the market. DBAG’s co-investment amounts to up to EUR 4.8m. About 38% of BTV

Group will be held by DBAG.

Investments/divestments in the existing portfolio:

� vitronet Projekte made two acquisitions. In October 2017, the company took over Dankers Bohrtechnik

and Dankers Projektierung GmbH (total annual revenues EUR 15m). With the acquisitions, it expands

the value chain to civil engineering for fibre-optic networks. DBAG invested EUR 3.8m alongside DBAG

ECF to finance the transaction. In May 2018, vitronet acquired Enetty Holding GmbH with its own funds.

Enetty bundles fibre-optic paths from various network providers to create a single direct connection that

can be sublet to customers on the basis of long-term contracts.

� netzkontor nord acquired BIB TECH in May 2018 to broaden its customer base, expand regionally and

secure additional capacities for network planning and project management. To finance the acquisition,

DBAG invested a further EUR 1.9m together with DBAG ECF.



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DBAG Fund VII acquisition:

� Karl Eugen Fischer GmbH: The company is the world’s leading manufacturer of cutting systems for the

tyre industry. Its equipment is used to manufacture rubber-coated steel wire and fabric layers for tyre

carcasses and tyre belts. These layers form the supporting structure for the tyre and give it shape and

driving stability. DBAG’s co-investment, as part of an MBO, amounted to EUR 22.7m for ca. 22% of the

company’s shares.

Investments/divestments in the existing portfolio:

� Merger of duagon Holding and MEN MikroElektronik: The merger, which was completed in May, formed

a leading provider of software and hardware solutions for data processing and communications

especially in rail vehicles. DBAG invested EUR 8.9m in duagon alongside DBAG Fund VII to finance the

transaction.

DBAG Fund VII:

� Merger of Polytech and G&G Biotechnology, manufacturer of light filling material for implants. DBAG

invested EUR 0.9m together with DBAG Fund VI.

� Cleanpart sold its healthcare business to Vamed, a subsidiary of Fresenius, in order to focus on services

for the semiconductor industry. DBAG received EUR 4.1m from the sale.

� Partial disposal of Silbitz Group has led to an initial cash inflow of EUR 1.3m for DBAG. 22% of the

shares were bought by Sistema Finance, subsidiary of listed JFSC Sistema. DBAG Fund VI will continue

to hold the majority in Silbitz.

� In connection with restructuring, DBAG and DBAG Fund VII raised its share in Unser Heimatbäcker from

12.6% to 18.8%, investing an additional EUR 1.9m.

� Pfaudler acquired Normag AG Labor- und Prozeßtechnik as well as interseal Dipl. Ing. Rolf Schmitz

GmbH to expand its product range and expertise.

Externally managed funds:

� DBG Eastern Europe, one of the two externally managed funds in the DBAG portfolio sold an investment.

DBAG received EUR 1.4m from the transaction. A further EUR 4.3m was received as carried interest

was paid out.

Accounting change with regard to “carried interest”

Following a long-standing dispute with BaFin (Federal Financial Supervisory Authority) regarding the

accounting methodology for “carried interest”, DBAG announced in an ad-hoc statement in June 2018 the

identification of the error with effects on earnings. In this context, DBAG had to adjust its guidance.

Definition of “carried interest” according to DBAG: “Carried interest is a share of the profits of a private

equity fund paid by the investment managers in excess of the amount that the investment managers

contribute to the fund after certain agreed-upon hurdles are cleared. It provides an incentive to investment

managers and creates an alignment of interest between them and the fund investors.”

The dispute with BaFin centred on when carried interest was to be booked in the P&L. DBAG so far

booked carried interest in case forecast distributions exceeded the hurdle (probability of a disposal). The

tighter BaFin rule says that carried interest has to be booked as soon as the unrealised fair values of the

assets are higher than the deposits that are still outstanding and exceed the hurdle.

Effects on DBAG results: Both accounting methods result in the same amount of carried interest over the

lifetime of a fund. However, the BaFin method leads to an earlier booking of carried interest, a step-by-

step accumulation and also a possible reversal in case of reduced value. In contrast, the old DBAG

method which included carried interest only if it became likely that the hurdle would be exceeded when the

next exit occurs. This method has led to a relatively late booking of carried interest with the bulk burdening

one accounting period.

In its 9M 2017/18 report DBAG changed the methodology of booking carried interest for the first time.

Retrospective adjustments must include fiscal 2016/17. DBAG already released information about the

possible effects on accounting in its 2016/17 annual report. The effect of the methodology change on 9M

2017/18 net result of investment activity was EUR -2.1m (EUR 31.4m according to the old method; EUR

29.3m according to the new method). 9M 2016/17 also changed materially with the earlier booking of



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carried interest from EUR 82.8m to EUR 75.6m.

This methodology change was the reason why DBAG had to reduce the guidance again to “net income:

>20% below the five-year average of EUR 43m” from its previous guidance for “net income 10–20% below

five-year average of EUR 43m”.

Future period results will benefit from the earlier booking of carried interest. However, neither the total

amount of carried interest nor the cash flow is affected.

Current private equity portfolio consisting of 25 companies

DBAG as of 30.62018 run a private equity portfolio of 25 companies in DBAG Funds V, VI and VII as well

as in DBAG ECF and ECF I. Investments in BTV and Von Poll were not included as the investment was

not concluded at that date. 21% of the total value of the portfolio was related to Engineering, 30% to

Industrial Components, 10% to Industry Services and 10% to Automotive. Other sectors accounted for

25% of the portfolio value. The portfolio value of EUR 329m exceeded the initial transaction values by

40%. Principally, following heavy divestments in the previous year, the portfolio is on average relatively

young. Hence, it will take some time until investments mature meaning that divestments in the amount of

last year are not probable over a one or two-year period in our view.

Cash flow development: liquid funds normalise after several acquisitions

DBAG’s liquid funds decreased from EUR 128m as of September 30, 2017 to EUR 11.2m after nine

months of fiscal 2107/18. This figure includes dividend payments of EUR 21.1m. However, investing CF

includes investment/divestment of long-term and short-term securities which are regarded as a cash-

equivalent by the company. Including securities in DBAG’s available cash, we calculate EUR 94m (EUR

162m at September 2017), which makes the situation look far more comfortable. DBAG tends to hold a

minimum cash position (incl. securities) of EUR 50m plus credit line to be prepared for opportunities on the

M&A front. Overall, the company continues to be in a position to play an active role when it comes to

additional acquisitions.

Principally, we believe 2016/17 was a year of divestments after an important part of the portfolio matured,

while 2017/18 is characterised by new investments. Hence, the cash position including securities was

unusually high at the end of the last business year and normalised during fiscal 2017/18. Effects from the

divestment of Cleanpart will probably only be booked in either Q4 2017/18 or Q1 of the next fiscal year.

Thus, we do not expect major changes with regard to investing cash flow (adjusted for securities) in Q4.

DBAG: company basics and description

Business model: Deutsche Beteiligungs AG (DBAG) is a publicly-listed private equity firm, focused on

management buyouts (MBOs) and financing expansion capital. DBAG makes direct investments in non-

listed, operationally healthy, German Mittelstand companies in different industrial and service sectors with

a typical annual sales volume of EUR 50-500m. DBAG offers investors the opportunity to participate in

private equity investments without the restrictions of classic private equity funds such as long durations,

holding periods, or minimum investment volumes. Investors constantly benefit from the company’s proven

track record and reputation, its competence and the management team’s deal-sourcing network. DBAG

generally targets a holding period of four to seven years and acquires new targets by paying multiples of

an estimated 5-8x EV/EBITDA. DBAG is a leading private equity firm in the MBO field in Germany and in

2016 closed DBAG VII, the largest ever private equity fund for the Mittelstand with more than EUR 1.0

billion in committed capital.

Differentiation from competitors: Founded in 1965 and with more than 300 private equity investments

under its belt, DBAG’s long-term track record is impressive and clearly differentiates the company from

competitors. This experience cannot be matched by new entrants. Furthermore, DBAG’s very solid track

record led to high profitability as shown in a 15-year average return to shareholders of more than 15%,

which far exceeded its own cost of capital. The company’s business model of investing its own funds

alongside those of co-investment funds helps to achieve broader diversification while earnings-wise,

management fees cover most of DBAG’s basic operating costs. This second business, the asset

management activities, set the company apart from competitors as: a) DBAG gains access to significantly

higher financial power and b) income from asset management is more resilient and steady than deal-

driven investment activities.

Experienced management: DBAG’s investment team of more than 25 managers has more than 200



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years of combined experience in the private equity market. In addition, the company and its management

has built up a broad and influential network in Germany and globally. In its half a century of business

activity, DBAG has become a well-known brand among the German Mittelstand companies. It is worth

mentioning that the company’s risk-minimising approach makes it obligatory for the management team to

place a private investment. This results in a risk-averse investment philosophy and reduced principal-

agency costs. On the basis of this knowledge and experience, DBAG’s impressive track record is

expected to continue in the years to come.



RESEARCH

Valuation

2013/14 2014/15 2015/16 2016/17 2017/18e 2018/19e 2019/20e

Price / Book 0.9 x 1.2 x 1.0 x 1.3 x 1.2 x 1.1 x 1.1 x

Book value per share ex intangibles 22.15 22.12 26.85 28.97 29.82 31.88 34.31

EV / Sales 3.7 x 7.4 x 4.3 x 3.3 x 6.9 x 5.5 x 5.2 x

EV / EBITDA 5.6 x 13.4 x 6.8 x 4.5 x 12.5 x 8.8 x 8.3 x

EV / EBIT 5.6 x 13.4 x 6.8 x 4.5 x 12.5 x 8.8 x 8.3 x

EV / EBIT adj.* 5.6 x 13.4 x 6.8 x 4.5 x 12.5 x 8.8 x 8.3 x

P / FCF n.a. 56.2 x n.a. n.a. n.a. n.a. n.a.

P / E 6.0 x 14.0 x 7.7 x 6.2 x 16.1 x 10.5 x 9.5 x

P / E adj.* 6.9 x 14.0 x 7.7 x 6.2 x 16.1 x 10.5 x 9.5 x

Dividend Yield 9.5 % 3.6 % 4.3 % 3.8 % 3.8 % 3.8 % 3.8 %

FCF Potential Yield (on market EV) 17.8 % 7.5 % 14.8 % 22.4 % 8.0 % 11.3 % 12.0 %

*Adjustments made for: -

Company Specific Items

2013/14 2014/15 2015/16 2016/17 2017/18e 2018/19e 2019/20e

NAV per share 22.16 22.16 26.91 29.01 29.85 31.91 34.34 Return on NAV 15.9 % 9.9 % 27.2 % 12.8 % 8.1 % 12.2 % 12.6 % Net result investment activity 55 29 60 94 34 54 62 Fee income fund services 22 19 18 27 29 31 32 Net result of fund services and investment activity 76 48 78 121 63 85 94



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Consolidated profit & loss In EUR m 2013/14 2014/15 2015/16 2016/17 2017/18e 2018/19e 2019/20e

Net result of fund services and investment activity 76 48 78 121 63 85 94

Net result investment activity 55 29 60 94 34 54 62

Fee income fund services 22 19 18 27 29 31 32 Personnel expenses 17 15 16 21 18 18 20

Other operating income 10 7 7 5 3 6 7

Other operating expenses 18 13 19 14 13 20 22

Unfrequent items 0 0 0 0 0 0 0

EBITDA 48 27 50 91 35 53 58

Margin 66.1 % 55.3 % 64.1 % 74.9 % 55.3 % 62.1 % 62.1 %

Depreciation of fixed assets 0 0 0 0 0 0 0

EBITA 48 27 50 91 35 53 58

Amortisation of intangible assets 0 0 0 0 0 0 0

Goodwill amortisation 0 0 0 0 0 0 0

EBIT 48 27 50 91 35 53 58

Margin 66.1 % 55.3 % 64.1 % 74.9 % 55.3 % 62.1 % 62.1 %

EBIT adj. 48 27 50 91 35 53 58

Interest income 0 0 0 0 0 0 0

Interest expenses 0 0 1 1 1 1 1

Other financial income (loss) 0 0 0 0 0 0 0

EBT 48 27 49 90 34 52 58

Margin 66.4 % 55.9 % 63.4 % 74.5 % 54.6 % 61.5 % 61.6 %

Total taxes 0 0 0 0 0 0 0

Net income from continuing operations 48 27 49 90 34 52 58

Income from discontinued operations (net of tax) 0 0 0 0 0 0 0

Net income before minorities 48 27 49 90 34 52 58

Minority interest 0 0 0 0 0 0 0

Net income 48 27 49 90 34 52 58

Margin 65.8 % 55.8 % 63.6 % 74.5 % 54.6 % 61.5 % 61.6 %

Number of shares, average 14 14 14 15 15 15 15

EPS 3.51 1.98 3.60 6.01 2.27 3.46 3.83

EPS adj. 3.04 1.98 3.60 6.01 2.27 3.46 3.83

*Adjustments made for:

Guidance: Net income >20% below five-year average of EUR 43.0m

Financial Ratios 2013/14 2014/15 2015/16 2016/17 2017/18e 2018/19e 2019/20e

EBITDA / Interest expenses 307.1 x 171.7 x 84.9 x 180.9 x 68.9 x 87.5 x 96.9 x

Tax rate (EBT) 0.8 % 0.1 % -0.3 % 0.0 % 0.0 % 0.0 % 0.0 %

Dividend Payout Ratio 57.0 % 50.6 % 33.3 % 23.3 % 61.6 % 40.5 % 36.5 %

Net result fund services & investments in EUR m


Performance per Share



NO T E Publ ished 10 .09 .2018 10

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Consolidated balance sheet In EUR m 2013/14 2014/15 2015/16 2016/17 2017/18e 2018/19e 2019/20e

Assets

Goodwill and other intangible assets 0 1 1 1 1 1 1

thereof other intangible assets 0 0 0 0 0 0 0

thereof Goodwill 0 0 0 0 0 0 0

Property, plant and equipment 1 1 1 1 1 1 2

Financial assets 245 277 330 288 377 416 453

Other long-term assets 0 0 0 0 0 0 0

Fixed assets 246 279 332 290 379 418 456

Inventories 0 0 0 0 0 0 0

Accounts receivable 0 0 0 0 0 0 0

Liquid assets 28 28 57 162 127 96 75

Other short-term assets 58 20 15 13 -35 -12 8

Current assets 86 49 73 174 92 84 83

Total Assets 333 327 405 464 471 502 539

Liabilities and shareholders' equity

Subscribed capital 49 49 53 53 53 53 53

Capital reserve 141 141 174 174 174 174 174

Retained earnings -5 -4 32 104 117 148 184

Other equity components 118 117 111 105 105 105 105

Shareholders' equity 303 303 370 436 449 480 517

Minority interest 0 0 0 0 0 0 0

Total equity 303 303 370 437 449 480 517

Provisions 29 23 32 26 21 21 21

thereof provisions for pensions and similar obligations 9 9 16 11 12 12 12

Financial liabilities (total) 0 0 0 0 0 0 0

thereof short-term financial liabilities 0 0 0 0 0 0 0

Accounts payable 0 0 0 0 0 0 0

Other liabilities 1 1 2 1 1 1 1

Liabilities 30 24 35 27 22 22 22

Total liabilities and shareholders' equity 333 327 405 464 471 502 539


Efficiency of Capital Employment

ROA 19.5 % 9.7 % 14.9 % 31.2 % 9.0 % 12.4 % 12.6 %

Return on Capital

NAV per share 22.16 22.16 26.91 29.01 29.85 31.91 34.34

Return on NAV 15.9 % 9.9 % 27.2 % 12.8 % 8.1 % 12.2 % 12.6 %

ROCE (NOPAT) 17.3 % 9.4 % 16.4 % 29.6 % 11.2 % 14.4 % 13.7 %

ROE 16.5 % 8.9 % 14.7 % 22.4 % 7.7 % 11.2 % 11.6 %

Adj. ROE 14.3 % 8.9 % 14.7 % 22.4 % 7.7 % 11.2 % 11.6 %

Balance sheet quality

Net Debt -19 -20 -42 -150 -116 -84 -63

Net Financial Debt -28 -28 -57 -162 -127 -96 -75

Net Gearing -6.3 % -6.4 % -11.3 % -34.4 % -25.7 % -17.5 % -12.2 %

Net Fin. Debt / EBITDA n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Book Value / Share 22.2 22.2 26.9 29.0 29.9 31.9 34.3

Book value per share ex intangibles 22.1 22.1 26.8 29.0 29.8 31.9 34.3

Return on NAV Development


NAV per share Development in EUR m


Dividend per Share in EUR



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Consolidated cash flow statement In EUR m 2013/14 2014/15 2015/16 2016/17 2017/18e 2018/19e 2019/20e

Net income 48 27 49 90 34 52 58

Depreciation of fixed assets 0 0 0 0 0 0 0

Amortisation of goodwill 0 0 0 0 0 0 0

Amortisation of intangible assets 0 0 0 0 0 0 0

Increase/decrease in long-term provisions 0 -1 10 -6 0 0 0

Other non-cash income and expenses -48 -19 -59 -85 -36 -52 -57

Cash Flow before NWC change 0 7 0 0 -1 0 1

Increase / decrease in inventory 0 0 0 0 0 0 0

Increase / decrease in accounts receivable 0 0 0 0 0 0 0

Increase / decrease in accounts payable 0 0 0 0 0 0 0

Increase / decrease in other working capital positions 0 0 0 0 0 0 0

Increase / decrease in working capital (total) 0 0 0 0 0 0 0

Net cash provided by operating activities [1] 0 7 0 0 -1 0 1

Investments in intangible assets 0 0 0 0 0 0 0

Investments in property, plant and equipment -1 -1 -1 -1 -1 -1 -1

Payments for acquisitions 0 0 0 0 0 0 0

Financial investments 116 93 51 104 80 70 70

Income from asset disposals 150 114 56 199 19 83 90

Net cash provided by investing activities [2] 33 20 4 95 -62 13 20

Change in financial liabilities 0 0 0 0 0 0 0

Dividends paid -16 -27 -14 -18 -21 -21 -21

Purchase of own shares 0 0 0 0 0 0 0

Capital measures 0 0 37 0 0 0 0

Other 0 0 0 0 0 0 0

Net cash provided by financing activities [3] -16 -27 24 -18 -21 -21 -21

Change in liquid funds [1]+[2]+[3] 17 0 28 77 -84 -8 -1

Effects of exchange-rate changes on cash 0 0 0 0 0 0 0

Cash and cash equivalent at end of period 28 28 57 128 44 36 35


Cash Flow

FCF -1 6 -1 -1 -1 0 0

Interest Received / Avg. Cash 1.8 % 1.6 % 0.2 % 0.1 % 0.1 % 0.1 % 0.1 %

Interest Paid / Avg. Debt n.a. n.a. n.a. n.a. n.a. n.a. n.a.


NO T E Publ ished 10 .09 .2018 12

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LEGAL DISCLAIMER

This research report (“investment recommendation”) was prepared by the Warburg Research GmbH, a fully owned subsidiary of the M.M.Warburg &

CO (AG & Co.) KGaA and is passed on by the M.M.Warburg & CO (AG & Co.) KGaA. It is intended solely for the recipient and may not be passed on

to another company without their prior consent, regardless of whether the company is part of the same corporation or not. It contains selected

information and does not purport to be complete. The investment recommendation is based on publicly available information and data ("information")

believed to be accurate and complete. Warburg Research GmbH neither examines the information for accuracy and completeness, nor guarantees its

accuracy and completeness. Possible errors or incompleteness of the information do not constitute grounds for liability of M.M.Warburg & CO (AG &

Co.) KGaA or Warburg Research GmbH for damages of any kind whatsoever, and M.M.Warburg & CO (AG & Co.) KGaA and Warburg Research

GmbH are not liable for indirect and/or direct and/or consequential damages. In particular, neither M.M.Warburg & CO (AG & Co.) KGaA nor Warburg

Research GmbH are liable for the statements, plans or other details contained in these investment recommendations concerning the examined

companies, their affiliated companies, strategies, economic situations, market and competitive situations, regulatory environment, etc. Although due

care has been taken in compiling this investment recommendation, it cannot be excluded that it is incomplete or contains errors. M.M.Warburg & CO

(AG & Co.) KGaA and Warburg Research GmbH, their shareholders and employees are not liable for the accuracy and completeness of the

statements, estimations and the conclusions derived from the information contained in this investment recommendation. Provided a investment

recommendation is being transmitted in connection with an existing contractual relationship, i.e. financial advisory or similar services, the liability of

M.M.Warburg & CO (AG & Co.) KGaA and Warburg Research GmbH shall be restricted to gross negligence and wilful misconduct. In case of failure in

essential tasks, M.M.Warburg & CO (AG & Co.) KGaA and Warburg Research GmbH are liable for normal negligence. In any case, the liability of

M.M.Warburg & CO (AG & Co.) KGaA and Warburg Research GmbH is limited to typical, expectable damages. This investment recommendation does

not constitute an offer or a solicitation of an offer for the purchase or sale of any security. Partners, directors or employees of M.M.Warburg & CO (AG

& Co.) KGaA, Warburg Research GmbH or affiliated companies may serve in a position of responsibility, i.e. on the board of directors of companies

mentioned in the report. Opinions expressed in this investment recommendation are subject to change without notice. All rights reserved.

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punishable. This applies, in particular, to reproductions, translations, microfilming, and storage and processing on electronic media of the entire content

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DISCLOSURE ACCORDING TO §85 OF THE GERMAN SECURITIES TRADING ACT (WHPG), MAR AND MIFID II INCL. COMMISSION DELEGATED REGULATION (EU) 2016/958 AND (EU) 2017/565

The valuation underlying the investment recommendation for the company analysed here is based on generally accepted and widely used methods of

fundamental analysis, such as e.g. DCF Model, Free Cash Flow Potential, Peer Group Comparison or Sum of the Parts Model (see also

http://www.mmwarburg.de/disclaimer/disclaimer.htm#Valuation). The result of this fundamental valuation is modified to take into consideration the

analyst’s assessment as regards the expected development of investor sentiment and its impact on the share price.

Independent of the applied valuation methods, there is the risk that the price target will not be met, for instance because of unforeseen changes in

demand for the company’s products, changes in management, technology, economic development, interest rate development, operating and/or

material costs, competitive pressure, supervisory law, exchange rate, tax rate etc. For investments in foreign markets and instruments there are further

risks, generally based on exchange rate changes or changes in political and social conditions.

This commentary reflects the opinion of the relevant author at the point in time of its compilation. A change in the fundamental factors underlying the

valuation can mean that the valuation is subsequently no longer accurate. Whether, or in what time frame, an update of this commentary follows is not

determined in advance.

Additional internal and organisational arrangements to prevent or to deal with conflicts of interest have been implemented. Among these are the spatial

separation of Warburg Research GmbH from M.M.Warburg & CO (AG & Co.) KGaA and the creation of areas of confidentiality. This prevents the

exchange of information, which could form the basis of conflicts of interest for Warburg Research in terms of the analysed issuers or their financial

instruments.

The analysts of Warburg Research GmbH do not receive a gratuity – directly or indirectly – from the investment banking activities of M.M.Warburg &

CO (AG & Co.) KGaA or of any company within the Warburg-Group.

All prices of financial instruments given in this investment recommendation are the closing prices on the last stock-market trading day before the

publication date stated, unless another point in time is explicitly stated.

M.M.Warburg & CO (AG & Co.) KGaA and Warburg Research GmbH are subject to the supervision of the Federal Financial Supervisory Authority,

BaFin. M.M.Warburg & CO (AG & Co.) KGaA is additionally subject to the supervision of the European Central Bank (ECB).

SOURCES

All data and consensus estimates have been obtained from FactSet except where stated otherwise.

http://www.mmwarburg.de/disclaimer/disclaimer.htm#Valuation


NO T E Publ ished 10 .09 .2018 13

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Additional information for clients in the United States

1. This research report (the “Report”) is a product of Warburg Research GmbH, Germany, a fully owned subsidiary of M.M.Warburg & CO (AG & Co.)

KGaA, Germany (in the following collectively “Warburg”). Warburg is the employer of the research analyst(s), who have prepared the Report. The

research analyst(s) reside outside the United States and are not associated persons of any U.S. regulated broker-dealer and therefore are not subject

to the supervision of any U.S. regulated broker-dealer.

2. The Report is provided in the United States for distribution solely to "major U.S. institutional investors" under Rule 15a-6 of the U.S. Securities

Exchange Act of 1934.

3. Any recipient of the Report should effect transactions in the securities discussed in the Report only through J.P.P. Euro-Securities, Inc., Delaware.

4. J.P.P. Euro-Securities, Inc. does not accept or receive any compensation of any kind for the dissemination of the research reports from Warburg.

Reference in accordance with section 85 of the German Securities Trading Act (WpHG) and Art. 20 MAR regarding possible conflicts of interest with companies analysed:

-1- Warburg Research, or an affiliated company, or an employee of one of these companies responsible for the compilation of the research, hold

a share of more than 5% of the equity capital of the analysed company.

-2-

Warburg Research, or an affiliated company, within the last twelve months participated in the management of a consortium for an issue in

the course of a public offering of such financial instruments, which are, or the issuer of which is, the subject of the investment

recommendation.

-3- Companies affiliated with Warburg Research manage financial instruments, which are, or the issuers of which are, subject of the

investment recommendation, in a market based on the provision of buy or sell contracts.

-4-

MMWB, Warburg Research, or an affiliated company, reached an agreement with the issuer to provide investment banking and/or

investment services and the relevant agreement was in force in the last 12 months or there arose for this period, based on the relevant

agreement, the obligation to provide or to receive a service or compensation - provided that this disclosure does not result in the disclosure of

confidential business information.

-5- The company compiling the analysis or an affiliated company had reached an agreement on the compilation of the investment

recommendation with the analysed company.

-6- Companies affiliated with Warburg Research regularly trade financial instruments of the analysed company or derivatives of these.

-6a- Warburg Research, or an affiliated company, holds a net long position of more than 0.5% of the total issued share capital of the analysed

company.

-6b- Warburg Research, or an affiliated company, holds a net short position of more than 0.5% of the total issued share capital of the analysed

company.

-6c- The issuer holds shares of more than 5% of the total issued capital of Warburg Research or an affiliated company.

-7- The company preparing the analysis as well as its affiliated companies and employees have other important interests in relation to the

analysed company, such as, for example, the exercising of mandates at analysed companies.

Company Disclosure Link to the historical price targets and rating changes (last 12 months)

Deutsche Beteiligungs AG 3, 5 http://www.mmwarburg.com/disclaimer/disclaimer_en/DE000A1TNUT7.htm

http://www.mmwarburg.com/disclaimer/disclaimer_en/DE000A1TNUT7.htm


NO T E Publ ished 10 .09 .2018 14

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INVESTMENT RECOMMENDATION

Investment recommendation: expected direction of the share price development of the financial instrument up to the given price target in the opinion of

the analyst who covers this financial instrument.

-B- Buy: The price of the analysed financial instrument is expected to rise over the next 12 months.

-H- Hold: The price of the analysed financial instrument is expected to remain mostly flat over the next 12

months.

-S- Sell: The price of the analysed financial instrument is expected to fall over the next 12 months.

“-“ Rating suspended: The available information currently does not permit an evaluation of the company.

WARBURG RESEARCH GMBH – ANALYSED RESEARCH UNIVERSE BY RATING

Rating Number of stocks % of Universe

Buy 113 55

Hold 89 43

Sell 4 2

Rating suspended 0 0

Total 206 100

WARBURG RESEARCH GMBH – ANALYSED RESEARCH UNIVERSE BY RATING Q

Q taking into account only those companies which were provided with major investment services in the last twelve months.

Rating Number of stocks % of Universe

Buy 32 67

Hold 16 33

Sell 0 0

Rating suspended 0 0

Total 48 100

PRICE AND RATING HISTORY DEUTSCHE BETEILIGUNGS AG AS OF 10.09.2018

Markings in the chart show rating changes by Warburg Research

GmbH in the last 12 months. Every marking details the date and

closing price on the day of the rating change.


NO T E Publ ished 10 .09 .2018 15

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EQUITIES Roland Rapelius +49 40 3282-2673 Head of Equities [email protected] RESEARCH Michael Heider +49 40 309537-280 Andreas Pläsier +49 40 309537-246 Head of Research [email protected] Banks, Financial Services [email protected]

Henner Rüschmeier +49 40 309537-270 Jochen Reichert +49 40 309537-130 Head of Research [email protected] Telco, Internet, Media [email protected]

Jonas Blum +40 40 309537-240 J. Moritz Rieser +49 40 309537-260 Small/Mid Cap Research [email protected] Real Estate [email protected]

Christian Cohrs +49 40 309537-175 Arash Roshan Zamir +49 40 309537-155 Engineering, Logistics [email protected] Cap. Goods, Renewables [email protected]

Felix Ellmann +49 40 309537-120 Franz Schall +40 40 309537-230 Software, IT [email protected] Automobiles, Car Suppliers [email protected]

Jörg Philipp Frey +49 40 309537-258 Malte Schaumann +49 40 309537-170 Retail, Consumer Goods [email protected] Technology [email protected]

Marius Fuhrberg +49 40 309537-185 Patrick Schmidt +49 40 309537-125 Financial Services [email protected] Leisure, Internet [email protected]

Ulrich Huwald +49 40 309537-255 Oliver Schwarz +49 40 309537-250 Health Care, Pharma [email protected] Chemicals, Agriculture [email protected]

Thilo Kleibauer +49 40 309537-257 Marc-René Tonn +49 40 309537-259 Retail, Consumer Goods [email protected] Automobiles, Car Suppliers [email protected]

Eggert Kuls +49 40 309537-256 Robert-Jan van der Horst +49 40 309537-290 Engineering [email protected] Technology [email protected]

Marina Manas Cháfer +49 40 309537-254 Andreas Wolf +49 40 309537-140 Renewables, Small/Mid Cap [email protected] Software, IT [email protected]

INSTITUTIONAL EQUITY SALES Klaus Schilling +49 40 3282-2664 Simon Pallhuber +49 69 5050-7414 Head of Equity Sales, Germany [email protected] Switzerland, France [email protected]

Tim Beckmann +49 40 3282-2665 United Kingdom [email protected]

Lyubka Bogdanova +49 69 5050-7411 United Kingdom, Australia [email protected] Jens Buchmüller +49 69 5050-7415 Scandinavia, Austria [email protected]

Matthias Fritsch +49 40 3282-2696 United Kingdom [email protected]

Michael Kriszun +49 40 3282-2695 Angelika Flegler +49 69 5050-7417 United Kingdom [email protected] Roadshow/Marketing [email protected]

Sanjay Oberoi +49 69 5050-7410 Juliane Willenbruch +49 40 3282-2694 United Kingdom [email protected] Roadshow/Marketing [email protected]

SALES TRADING Oliver Merckel +49 40 3282-2634 Bastian Quast +49 40 3282-2701 Head of Sales Trading [email protected] Sales Trading [email protected] Elyaz Dust +49 40 3282-2702 Jörg Treptow +49 40 3282-2658 Sales Trading [email protected] Sales Trading [email protected] Michael Ilgenstein +49 40 3282-2700 Jan Walter +49 40 3282-2662 Sales Trading [email protected] Sales Trading [email protected] MACRO RESEARCH Carsten Klude +49 40 3282-2572 Dr. Christian Jasperneite +49 40 3282-2439 Macro Research [email protected] Investment Strategy [email protected] Our research can be found under: Warburg Research http://research.mmwarburg.com/en/index.html Thomson Reuters www.thomsonreuters.com Bloomberg MMWA GO Capital IQ www.capitaliq.com FactSet www.factset.com For access please contact:

Andrea Schaper +49 40 3282-2632 Kerstin Muthig +49 40 3282-2703 Sales Assistance [email protected] Sales Assistance [email protected]

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