Deutsche Bank AG has initiated coverage on Marfin Investment Group (MIG) with a price target of EUR 7.10 per share. In its report dated 18 June, 2008, DB says MIG disposed of its banking assets in 2007 and raised EUR5.2bln through the largest ever Greek equity offering to focus on investments in the SEE region. DB says based on its static NAV model, MIG is valued at EUR7.1 per share, 31% higher vs. current levels (total return), or 11% above Q108 NAV, without accounting for any returns to be generated by the FY2008E EUR1.5bln cash position.
MIG holds stakes in market-leading companies in the South Eastern Europe (SEE) region in five core sectors (food, financials, shipping, IT & Telecoms and healthcare) while holding stakes in numerous non-strategic assets (private equity investments).
MIG has a total of 17 companies and targets value creation through re-capitalization, organic growth, sector consolidation, corporate restructuring and synergies across its investments.
MIG is targeting net equity returns of at least 25%, paying out a minimum 50% of gains (capital or earnings) to shareholders over the medium term. Including the EUR283mln capital return to be paid this year MIG has paid shareholders a total of EUR1.1bln in the past 12 months in the form of capital returns and ordinary dividends (excluding a share buyback of EUR525mln).
Management has also stated it will pay another ‘satisfactory’ dividend out of this year’s earnings, irrespective of market conditions. DB estimate EUR250mln or ca. 6% 2008 dividend yield.
“Our EUR7.1 target price is based on a static sum-of-the-parts NAV model with separate valuations per asset. We value strategic assets (Vivartia, Hygeia and Attica group) through DCF models and account for book values and/or acquisition prices for non-strategic assets. Our valuation does not reflect the dynamics of further investments driven by MIG’s EUR1.5bln FY2008E cash position and/or the use of any leverage. Risks include difficulties in execution, exposure in SEE region, adverse market conditions and a slowdown in consumer spending affecting the business of its subsidiaries,” concludes DB in its report.
