According to Lai in his Feb 25 report, FY2025’s distribution per unit (DPU) of 13.39 Euro cents is slightly ahead of his projections.
“Distributions reflected higher financing costs rather than weaker property fundamentals, as net interest costs increased 25.2% following the higher coupon on the EUR500 million green bond issued in January 2025 and a higher average level of borrowings,” Lai shares.
Lai added that SERT’s unit buyback programme supported per-security outcomes, with the EUR10 million buyback cited as 1.1% accretive.
Given the pressure from refinancing being lifted at SERT, Lai understands that the REIT will shift their focus to active capital recycling following divestment of some EUR140 million being completed in 2HFY2025.
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“Given the large cash balance in excess of EUR110 million, we believe SERT will be actively looking to redeploy capital into accretive acquisitions. As such, we have assumed acquisitions of EUR70 million (proceeds from recent divestments in Slovakia) in 2HFY2026,” according to Lai.
“However, as we have only assumed a half-year contribution from the assumed acquisitions, we anticipate that there will be some drag to earnings in FY2026,” according to Lai.
Following his revised projection, he foresees a relatively flat FY2026 DPU for SERT with the half-year income contribution from the assumed acquisitions.
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“As such, we maintain our ‘buy’ recommendation on SERT with a slightly higher target price of EUR1.90. Our DCF-based valuation assumes near-term acquisitions that will support earnings in FY2026,” Lai states.
Lai’s target price suggests a forward target distribution yield in excess of 7.0% over the medium-term for SERT.
As at 2.38pm, units in SERT’s European counter are trading 1 Euro cent higher, or 0.6% up at EUR1.67. Units in SERT are trading up 2 cents or 0.8% higher at $2.50.
