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DBS: Cromwell European REIT – Buy Target Price EUR2.60

Posted on August 16, 2022August 16, 2022 By alanyeo No Comments on DBS: Cromwell European REIT – Buy Target Price EUR2.60
Higher valuations backed by growing income

(+) Higher revenues and NPI driven by pivot to logistics and light industrial

  • 1H22 revenues increased 8.5% y-o-y to EUR107.4m
    • Mainly driven by new acquisitions over the past year, and partially offset by disposals and redevelopments
    • Acquired four light industrial and logistics properties in 1H22 that were valued at c.EUR92m
    • Divestments of c.EUR19m in 1H22
  • NPI of EUR67.3m was 4.7% higher y-o-y, also driven mainly by acquisitions
    • On a like-for-like basis, NPI would have been flat y-o-y
  • NPI for the logistics property segment grew at the highest rate, at 24.3% y-o-y
    • Strong NPI growth driven by pivot to logistics with c.EUR212.6m in acquisitions in FY21 and a further c.EUR92.0m in 1H22
  • NPI for the office segment was down 3% y-o-y, mainly due to the absence of income contribution from Via Nervesa 21 in Italy that is currently being redeveloped

(+) 1H22 DPU of 8.695 Ects; slightly above our estimates

  • 1H22 DPU of 8.695 Ects was 2.3% higher y-o-y
    • Forming slightly more than 51% of our FY22 DPU estimates
  • Distributable income of EUR48.9m was 5.9% higher y-o-y
    • Includes EUR1.1m of capital gains distribution in lieu of the redevelopment of Via Nervesa 21
    • CERT expected to continue tapping into capital gains distribution in lieu of properties that are taken off for redevelopment
    • An estimated c.EUR8m in capital gains remain

(+) Higher occupancies of 95.4% and positive rental reversions

  • CERT’s overall portfolio occupancy inched up 0.6ppt q-o-q to 95.4%
    • Higher occupancies were reported for both its office and logistics/light industrial portfolios
  • Office portfolio reported a slight improvement in occupancies for France and Finland, partially offset by a slight dip in occupancies in the Netherlands and Poland
  • Light industrial/logistics portfolio reported a pickup in occupancies across the board, with the only dip in occupancies reported in the Czech Republic
  • Positive rental reversions of 2.9% in 1H22
    • Office portfolio: +3.4%
    • Light industrial/logistics portfolio: +2.7%
  • Remaining leases due to expire in FY22 are well spread out across its office and light industrial/logistics assets
    • Strong leasing demand and rental rates for light industrial/logistics portfolio expected to be more than sufficient to offset any weakness in the office portfolio
CERT-1H22-150822Click here to Download Full Report in PDF

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Research - Equities Tags:cromwell european reit

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