Vonvovia SE – what are some european stocks you believe are fairly valued?

It seems that a lot of negativity is already prized in and there are a many stocks that have reached attractive levels. I am currently looking at the following stock:

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Vonovia SE

Vonovia SE is the largest real estate company in Germany (they do own apartments in Austria and Sweden). They own 549.484 apartments in total (488.889 in Germany – 39.374 in Sweden – 21.221 in Austria). Around 2.2% of the apartments are vacant (as of June 30, 2022) – 3.0% in Sweden – 2.0% in Germany – 5.2% in Austria.

For example, in Austria there are a new (2022) requirement for mortgages:

– minimum 20% down payment

– maximum length of 35 years

– monthly mortgage payment may not be more than 40% of monthly net income

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It is undeniable that housing will always be needed and now that interest rates are rising (therefore making mortgages more expensive) less people can afford to buy apartments which in turn helps Vonvovias business.

Furthermore, the current crisis in Ukraine is also beneficial as many Ukrainians have come to Germany (more than 915.000 registered as of August – 353.424 are registered with employment agencies, job centers, local authorities)

–> https://www.dw.com/en/is-support-for-ukrainian-refugees-waning-in-germany/a-62745596#:~:text=But%20if%20hard%20figures%20are,centers%2C%20and%20other%20local%20authorities.

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Intermin Financial Report for 2022 H1: https://report.vonovia.de/2022/q2/en/

P/E of 8.55

Div yield of 7.74% (payout ratio of less than 70% – so the dividend does not seem to be in immediate danger)

Market cap around 17B

EPS 2.51

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Risks

They have around 70B in debt (vast majority is long term debt), however, their total assets are around 106B (debt to assets around 65%). Management recognized this problem and put apartments on the market which should bring in 13B and deleverage the company.

Political risk is also a potential problem. The german government could impose new policies (like further limiting the amount of rent Vonovia can demand per tenant).

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Nonetheless, I believe the market overreacted and the stock is currently fairly priced with a good margin of safety.

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I am also looking at Vestas (wind turbines), ING (bank with pretty good dividend), BASF SE (largest chemical company in the world – hit pretty hard by the war in Ukraine), however, I did not do extensive dd on these.