Deutsche Beteiligungs AG Investment Update: Discount Closed

Deutsche Beteiligungs AG (DBA.DE) has completed several transactions recently. Since July 2012, along with its co-investment funds, DBAG has agreed to divest one company and invest in two new companies while increasing its holding in the listed group Homag. Despite the challenging economic climate, realisation gains during the current financial year enabled DBAG to propose an increased special dividend of €0.80 per share in addition to the base dividend of €0.40 per share, which combined equates to a dividend yield of 6.4%. These transactions reaffirm DBAG’s strong position in the German medium-sized private equity market. Supported by its fund-raisings, which are reviewed in our recent update note, it remains in a strong position to capitalise on any further investment opportunities. Over the last six months, DBAG’s discount to NAV has closed from c 20% to its current level of 6%, at a time when the broader European-listed private equity sector (LPX Europe) discount has narrowed from c 40% to 30%.


Multiple new investments
DBAG has been active within the German Mittelstand market over recent months. In October, DBAG agreed to sell its holding in Coperion Capital at a €15m premium to its holding value. In November, it acquired a majority stake in print media and technical textiles manufacturer Heytex in an MBO, while in December DBAG increased its holding in the listed group Homag and made its first investment with DBAG Expansion Capital Fund in Plant Systems & Services. With credit markets remaining tight, DBAG expects more opportunities for expansion financing going forward.

Considerable funds available for new investments
Despite these recent transactions, DBAG still has considerable funds available for further investment opportunities. We estimate that combined with its co-investment funds, DBAG has c €900m (including DBAG Fund VI €567m) still to invest, which represents c 65% of its total investment portfolio (Edison est. €1.4bn).

Valuation: Discount closed
DBAG continues to trade at a premium to its peer group (5% discount to NAV vs LPX Europe 30%), which we ascribe to a robust balance sheet, strong long-term track record, regular dividend and its focused investment mandate. However, we believe DBAG’s current share price appears fully valued given current market conditions, even though we expect the global nature of DBAG’s investee companies to provide resilience against slowing European growth.

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