SINGAPORE (Apr 10): DBS Group Research is initiating coverage on Cromwell European REIT (CEREIT) with a “buy” call and a target price of 0.63 euros. The research house says CEREIT is one of its top picks among the Singapore real estate investment trusts (S-REITs).
See: Six S-REITs to jump back on as sector bottoms out
CEREIT is the first Singapore-listed REIT with a diversified Pan-European portfolio that offers investors a unique opportunity to invest in office, light industrial/logistics and retail assets located in Denmark, Germany, France, Italy, and the Netherlands.
About 88% of the REIT’s initial portfolio by appraised value comprises either freehold land or ongoing leasehold land which is classified as continuing leasehold or perpetual leasehold. This is deemed favourable, compared to other S-REITs that predominantly hold properties with up to 99-year leases.
In a Tuesday report, analyst Mervin Song says the REIT is well positioned to benefit from an uplift in rent as it rides on the improving European economy.
In addition, with European property yield spreads being above the historical 10-year average, CEREIT is poised to gain from increases in property values.
The REIT has a weighted average lease expiry (WALE) of 4.9 years, which offers strong income visibility, and with most of the leases also linked to inflation or similar indices, it has an inbuilt organic profile.
The REIT is backed by Australian-listed Cromwell Property Group (CPG), which has a 15-year track record in Europe, along with “on the ground” presence in several European markets.
Hence, the analyst views that CEREIT has the requisite support to identify DPU accretive acquisitions.
“In addition, while there is a lack of familiarity with CPG by some investors, we believe ARA Asset Management, a well-known real estate fund manager, taking a 19.5% interest in CPG should give investors confidence over CPG’s execution capability,” adds Song.
Investors will be able to trade units in CEREIT in SGD from Apr 16 onwards.
See: Cromwell European REIT to trade in Singdollar from Apr 16
As at 3.35pm, units in CEREIT are trading at 0.59 euros, giving it an FY18 price-to-earnings ratio of 15.7, with a distribution yield of 7.3%.
