Equity valuation of Deutsche Wohnen AG

Abstract

The objective of this master thesis is to perform an equity valuation of the German real estate company Deutsche Wohnen in order to determine a rational target share price and to give a buy or sell recommendation. After providing an overview of widely used valuation techniques, the most suitable approaches for a real estate company are identified. Moreover, an in-depth analysis of the macroeconomic environment as well as the prevailing demographic situation of the most important German metropolitan areas are provided. Further, the German real estate market is examined, and major industry trends are derived. Due to a significant increase in the number of households and given the ongoing trend of urbanization as well as relatively low numbers of new apartment constructions, demand is expected to exceed supply in the long run. As a result, prices are anticipated to increase, especially in metropolitan areas. The business model of Deutsche Wohnen generally focuses on operating residential units in prime locations such as Berlin with the aim to maximize the Net Asset Value, through new acquisitions and a participation in positive future rent developments. Based on this analysis Deutsche Wohnen is valued by applying the following techniques: trading and transaction multiples, the residual income approach as well as the discounted cash flow model. The results indicate a target value of EUR 32,76 per share. With regard to the stock price of EUR 25,62 on 31.12.2015 a buy recommendation can be concluded.

Date of Award	20 Oct 2016
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	José Carlos Tudela Martins (Supervisor)