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Siemens wants to arouse investors’ imaginations

DThe Munich-based Siemens group once again brings a notable part of the company to the stock exchange with its energy business in its long 170-year history. Siemens itself described this step as “another important milestone on the way to the creation of an independent and world-leading energy specialist.”

In other words, Siemens shareholders should automatically receive one Siemens Energy AG share for every two shares in Siemens AG. However, the group only wants to split off 55 percent of Siemens Energy to its own shareholders, but intends to “further significantly reduce” its stake in Siemens Energy within 12 to 18 months. Meanwhile, 35.1 percent remain with the Siemens Group, 9.9 percent with the Siemens pension fund.

In addition, Siemens contractually agrees to no longer have a “controlling influence” on the new company. Specifically, this means that the number of Siemens representatives on the supervisory board is limited, thereby preventing Siemens from asserting itself against the other shareholders. The top controller still has a lot of barn smell, it will be the outgoing Siemens boss Joe Kaeser.

IPO starts in September

Subject to the approval of the Extraordinary General Meeting on July 9, the spin-off is planned until the end of September 2020 as announced. The initial listing on the stock exchange is scheduled for September 28.

The newcomer to the stock exchange is a real global player with more than 90,000 employees worldwide. When it comes to wind turbines, Siemens Energy is one of the world market leaders in the field of renewable energies with its 67 percent stake in Siemens Gamesa Renewable Energy.

In the past financial year, the company generated sales of around 29 billion euros. Adjusted for restructuring costs of around 0.3 billion euros, the adjusted EBITA would have been around 1.3 billion euros. The former parent company emphasizes that the new company is financially very well positioned. At 37.8 percent, the equity ratio is even higher than that of the remaining Siemens AG. The rating should be in the so-called investment grade, which ensures broad access to financing options.

Siemens promises future shareholders that Siemens Energy intends to distribute between 40 percent and 60 percent of consolidated profit after tax to shareholders each year. That sounds solid and would be a sign of an attractive dividend policy.

A problem with the image

To what extent is Siemens Energy attractive to investors in the long term? Many factors come together here. Firstly, the problem with the image. (Index) funds and probably also investors who are increasingly critical of coal, should first withdraw money. Likewise, many existing Siemens shareholders will probably be wondering what to do with the two new shares. Keep both or sell one because you either believe more in the industrial automation of the parent company, or rather want to focus on energy?

The evaluation of Siemens Energy is also exciting. With a turnover of 30 billion (that’s a third of Siemens’ total turnover), JP Morgan and UBS see Siemens Energy as having a market value of only 10 billion euros. This is astonishing when you consider that only the large share in the wind power subsidiary Siemens Gamesa is worth 6.4 billion. “The independence of Siemens’ energy business is an important milestone in the successful implementation of our Vision 2020+,” said Siemens CEO Joe Kaeser. In his view, he may be right.

On the other hand, it must first be shown how this is reflected in balance sheets and how the stock exchange accepts the topic. Meanwhile, a previous Siemens shareholder should also notice the future valuation of the Siemens paper. Siemens paper is undervalued if you only assume the figures for the future core business of Munich. The price-earnings ratio of the “new” Siemens AG is more than 35 percent lower than that of its industry competitors.


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To detailed view

That brings a bit of fantasy into a share history that Siemens shareholders have only given limited pleasure in the past few years. In three years ‘time, Siemens’ share price lost more than 20 percent, and those who have been with Munich for ten years will only get a plus of 40 percent. Based on UBS, Siemens stock currently has potential and is a candidate to buy. The Swiss still see a target price of 117 euros.

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