Corestate Capital (WKN: A141J3) is a real estate investment company founded in 2006, but has seen a rapid rise in recent years. It acts as a lessor and investment manager for and for real estate and also offers facility management services. Managed capital was most recently EUR 26 billion and had about 730 people. The company is based in Luxembourg, which also probably has tax considerations.
This rapid rise seems likely to be too fast for US investment firm Muddy Waters Research. It has been known to detect questionable corporate practices and was right about fraud involving the Chinese Sino Forest, which eventually had to file for bankruptcy in 201
So, you should sell your Corestate Capital stock after Muddy Waters started? ] What has Happened
Muddy Waters recently entered a short position (speculators that have fallen on prices) in the order of 0.5% of Corestate Capital's share capital. And since the company is so notorious for its short sales, many investors are now asking themselves, "What's wrong with Corestate Capital?"
At present, one can only guess, for official reasons, not yet published. For example, properties are vulnerable to overvaluation or incorrect valuation. Another reason may be the high level of long-term debt in relation to short-term cash.
Muddy Waters strategy is questionable
Muddy Waters usually publishes the background to his investment in a public report at the same time as his investments, In the present case this has not happened yet. Similar to Wirecard (WKN: 747206) -Actie but one can also suspect that only one price slide will be released (be) .
It is legitimate, the reason why, but investors usually do so in their annual reports or at the AGM rather than directly after opening a position. Therefore, this approach is also questionable.
Card sales companies that are not profitable in the long term
Still, a stock will not become flat if the allegations (which we do not know in this case) are not confirmed or too weak. Thus, Muddy Waters has already started dropping courses in 2016 on Ströer Media (WKN: 749399) and was thus wrong. Today, Ströer is over 50% higher (17.10.2019).
In the long term, card sales are generally not profitable. Warren Buffett also advises against it and the reason is very simple: A stock can fall 100%, but rise without limits. This alone limits the chances of winning. Historically, many investors have stopped shutting down the entire company and ended their career due to short sales.
Corestate Capital on the path to operational excellence
If all figures are correct, Corestate will remain on its growth. For 2019, sales are therefore expected to be between EUR 285 and 295 million and a profit between EUR 130 and 140 million. Last year, these figures were still EUR 204 million or EUR 105 million. In the longer term, CEO Lars Schnidrig expects annual growth of about 5% to 10%.
About half of the profits will be distributed to the shareholders as a dividend in the future, which currently gives a dividend of more than 8%. would correspond. In addition, the share is now trading at a price-to-book ratio of only 1.07 (October 17, 2019) after the fall in prices. This is very cheap.
So Muddy Waters has very good reasons to present, because the company with Corestate's stock valuation and operational development cannot justify its entry. In addition, the great commitment of the founders (over 40%) continues to speak for the company.
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Christof Welzel does not own any of the mentioned stocks. Motley Fool does not own any of the aforementioned stocks
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