Q1 preview: performance fees and banking to drive EBIT

Henry Wendisch13 May 2024 05:45

Topic: MLP's Q1 results are due on Wednesday, May 15th and we expect a solid EBIT expansion driven by a contribution of performance fees (first time since Q4'21) as well as continuous support from the banking business. In detail:

Solid top-line: For Q1, we expect sales to grow by 7% to € 280m driven by Wealth Management (eNuW: € 81m, +10% yoy, thereof € 7m performance fees) as well as Interest Income (eNuW: € 20m, +70% yoy) while Non-Life Insurance (NuW: € 97m, +6% yoy) and Old-Age Provision (eNuW: € 46m, +7%) should also continue to develop favourably. On the other hand, we expect Real-Estate to remain muted (eNuW: € 6m. -49% yoy) due to the absence of new development projects (vs. larger projects in Q1' and Q4'23). Accordingly, Loans and Mortgages should also have remained muted (eNuW: € 3.7m).

Disproportionate EBIT expansion: Thanks to the strong profit drivers Wealth Management and Interest Income, we expect EBIT to grow disproportionately by 14% yoy to € 37m (vs. Q1'23: € 32.4m) thanks to an ongoing strong interest result (eNuW: € 12.7m, + 24% yoy) as well as an EBIT contribution from performance fees (eNuW: € 5m). Both profit drivers should offset increased personnel expenses (eNuW: € 55m, +6% yoy) and expenses of the interest business (eNuW: € 6.4m)

Guidance seems conservative: MLP's FY'24e EBIT guidance of € 75-85m is well below our (eNuW: € 92m) and in line with market (eCons: € 85m) expecations and thus seems conservative already. For the remainder of the year, we expect the interest results to remain strong, even in the even of slight rate cuts. Additionally, capital markets also develop favourably so far, which should continue to drive AuM growth (and thus sales growth) next to continuous capital inflows from MLP's mass affluent customer base. On top of that, another opportunity for performance fees in the coming quarters could also arise, which we do not reflect in our estimates. On a side note, the negative effect of € 8m in one-off expenses (€ 5m goodwill impairment in Q4 and € 3m merger related costs in Q2) on last years EBIT should not occur again and thus also support an elevated EBIT for FY'24e.

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Against this backdrop, MLP's shares are not priced adequately, in our view. The outstanding AuM of € 57bn already explain 90% of MLP's current valuation, while the strong net liquidity of € 190m makes up 30% of MLP's market cap. (see SOTP below). This implies, that the remaining business (ex AuM) is not at all reflected in MLP's current valuation, which we regard as highly unjustified for a well diversified business with a 68% recurring revenue share.

Hence, we reiterate our BUY recommendation with an unchanged PT of € 12.00, based on FCFY'24e and SOTP.

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