Close Brothers Seydler Research AG - BVB Aktie - Borussia Dortmund

Borussia Dortmund GmbH & CO KGaA
Investment thesis
Borussia Dortmund GmbH & Co KGaA is a Germany-based company engaged in
the operation of Ballspielverein Borussia (BVB), a professional football club based
in Dortmund, Germany. BVB is one of the most successful companies in European
professional football and one of the few clubs listed on a stock exchange (and the
only listed club in Germany).
BVB is one of the most
successful football
clubs in Germany
The competition of major football clubs in West Germany is eminent. Borussia
Dortmund’ archrival FC Schalke 04 is just 35 km away and the differences in the
numbers of fans and fan clubs are comparatively low (Borussia Dortmund has
around 80.000 members and FC Schalke 04 has even 119,040 members). In
addition there are many other clubs such as Dusseldorf, Leverkusen and Cologne
in North Rhine Westfalia (NRW), which compete for sponsors and fans.
On the other hand, Bayern Munich’ geographically closest competitor Augsburg is
70 km away and differences between the number of registered fans is enormous
(there are 225,000 registered FC Bayern Fans against 11,178 FC Augsburg
members). Generally, Dortmund and NRW also have a disadvantage in terms of
purchasing power of residents which is significantly lower than in Munich and
Bavaria. In comparison Dortmund has a purchasing power of EUR 19,221 per
resident (NRW of EUR 20,621) whereas Munich has a purchasing power of EUR
28,247 per resident (Bavaria of EUR 22,508)
After a long transformation phase, the company has stabilised its operative
performance over the last year. Along with a steady improvement in net income
and EBIT margin, the company pushed ahead with achieving the Champions
League final and therefore generating more revenues than the company has ever
achieved before.
Strong growth
Taking into account that the fourth quarter will be as profitable as the first nine
months this fiscal year will end very positive. Overall, we expect the group to
achieve total revenues of EUR 289.4m, indicating a 34.4% growth YoY. Therefore,
4Q revenues will amount to EUR 109.0m. The estimated EBITDA margin of 48.0%
leads to a margin for full year of 32.0%, corresponding to an EBITDA of EUR
92.5m. Most of this year’s 4Q performance is based on the sale of Mario Götze for
EUR 37m (due to an exit clause) to FC Bayern München. All in all, net income
should be at EUR 50.7m, translating into an EPS of EUR 0.82.
4Q will confirm the
positive momentum in
the current fiscal year
In the long-term perspective, we conservatively forecast the EBIT-margin to be at
around 15%. BVB should achieve this through stabilisation of revenues at a much
higher level after the establishment of BVB again as a top contender in European
football.
Long-term EBIT-margin
should be at 15%
Overall, BVB has established an attractive business model around the core product
football which is superior in many respects as it enables to remain highly innovative
while keeping at the same time operating expenses on a manageable level. As a
result of the recent sporting success also on an European level the strategic focus
allows the company on focusing on the sporting success which will accordingly lift
also the revenue streams of all segments. This sadly also involves the transfer
segment, since players from an attractive team always are more in demand than
from mediocre teams. Best example hereby was the recent Götze transfer to FC
Bayern München. While we are certain that the club would have never sold the
player the exit clause in Götze’s contract made it nearly impossible for BVB to
refuse the deal. Since then the management stated that from now on, the team will
Transfer policy
www.cbseydlerresearch.ag Close Brothers Seydler Research AG | 3