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Sirius shrugs off pandemic

The German commercial landlord benefited from rising asset valuations and resilient rent collection over the first half
November 23, 2020
  • Growth in funds from operations resulted in a 3 per cent rise in the interim dividend
  • Rent collection rate over the first half was more than 97 per cent
IC TIP: Buy at 86p

Resilient income streams in the face of Covid-19 continued to drive up the value of industrial assets, in contrast to the office and retail sectors. For Sirius Real Estate (SRE), that resulted in a 5 per cent increase in EPRA (European Public Real Estate Association) net tangible assets per share over the first half.   

Demand for industrial assets in recent months has been intensified by the desire among occupiers to localise more of their supply chains and limit disruption to manufacturing and distribution, said chief executive Andrew Coombs. “We weren’t seeing sub-6 per cent [investment] yields pre-pandemic,” he said. A 1.1 per cent rise in the average rental rate points to a future potential rise in asset valuations. That largely offset the impact of two large tenant move-outs, which reduced the occupancy rate to just under 84 per cent, from 85 per cent the prior year.   

Yet the flip-side to strengthening demand is that increasing the scale of the portfolio will also prove more costly, but that did not stop the German industrial landlord returning to the acquisitions market with the €9.1m (£8.1m) purchase of industrial and office park in Norderstedt. Nevertheless, Mr Coombs expects a “flurry” of acquisitions within the coming months as the industry plays catch-up. 

A 7 per cent increase in funds from operations supported a further rise in the dividend, which Panmure Gordon forecasts will total 3.6c a share this year, rising to 3.8c in 2022. The shares trade at a slight premium to the brokerage’s forecast NAV of 83p a share at the end of March, but that is supported by a rent collection rate of more than 97 per cent this year and rising portfolio valuation. Buy.

Last IC view: Buy, 78p, 1 Jun 2020

SIRIUS REAL ESTATE (SRE)   
ORD PRICE:86pMARKET VALUE:£ 864m
TOUCH:85.2-86p12-MONTH HIGH:94pLOW: 44p
DIVIDEND YIELD:3.8%TRADING PROP:nil
PREMIUM TO NAV:6%  
INVESTMENT PROP:€1.24bnNET DEBT:46%
Half-year to 30 SepNet asset value (c)Pre-tax profit (€m)Earnings per share (c)Dividend per share (c)
20197679.76.91.77
20208162.25.51.82
% change+7-22-21+3
Ex-div: 17 Dec   
Payment: 21 Jan   
£1=€1.11