LEG Immobilien SE – Residential Real Estate Provider in Germany

Brief Summary for Investors: LEG Immobilien SE is a leading residential real estate company focused on North Rhine-Westphalia with a portfolio of over 166,000 residential units. Its business model includes rental, leasing, and housing services.

Development The share price remained stable at around €120 until the end of 2021, but then collapsed sharply in the wake of the interest rate turnaround in 2022/23, reaching a low of approximately €50. This collapse directly correlates with the devastating 2023 annual result (loss of €-21.17 per share), caused by impairment-based revaluations of the portfolio and a sharp rise in capital costs. Since mid-2023, the share price has recovered from its low, but continues to exhibit strong volatility with prices around €70 and remains well below its historical level. The latest quarterly figures indicate an operational recovery with stable rental income and positive earnings per share.

Opportunities: The continued high demand for housing in the company's core markets provides stable rental income. The latest quarterly results (EPS of 0.78 to 3.26) demonstrate a return to operating profitability after the impairment. The high free cash flow supports the ability to pay dividends and invest strategically.

Risks: The high interest rate environment continues to weigh on the valuation of the real estate portfolio and increases the refinancing costs for the substantial debt load (leverage ratio of 1.66). The low liquidity ratios (current ratio < 0.31) indicate potential bottlenecks in short-term solvency. The dependence on regional economic development in North Rhine-Westphalia and regulatory interventions (e.g., rent control) remain typical industry risks.

Additional Notes: A recent insider purchase transaction by a member of the Management Board could be interpreted as a signal of confidence in the current valuation, but should not be overestimated given the small overall position.

Conclusion: LEG has overcome the acute revaluation phase and stabilized its operations. The fundamental challenge remains the high level of debt in a persistently high interest rate environment. For investors, the stock is a speculative bet on a future interest rate cut, which would ease the valuation and refinancing costs. The current price appears to largely price in the risks, but a sustainable recovery is dependent on an easing of the capital market.

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