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RDI positioned for growth

Greater focus on growth ares like serviced office space
October 29, 2018

RDI REIT (RDI) has set out to be the UK’s leading income-focused real estate investment trust, and with a forecast dividend yield for 2019 of 8.6 per cent fully covered by earnings, it is one of the top payers in the sector.

IC TIP: Buy at 33.05p

Trading in the year to August 2018 saw a further shift towards the London serviced office market, where the group's current 7 per cent share of London office stock is forecast to rise to nearly a third by 2030. This is part of a strategy to move into areas of investment that offer greater growth potential. To finance further acquisitions, RDI raised £255.7m through disposals at an average 9 per cent premium to book value. This included the sale of the German supermarket portfolio at a 10.8 per cent premium to book value, and regional offices in the UK where it considered there to be less opportunity for rental growth.

The group's retail division faced a much tougher year, as several companies folded while others began paying less rent. Overall, this reduced annualised gross rental income by 0.7 per cent. However, outside Greater London the shopping centre portfolio is focused on food, discount and convenience retailing to local communities, and occupancy rates remained high at 96.4 per cent.

Analysts at Peel Hunt are forecasting adjusted net asset value (NAV) of 43p at the August 2019 year-end (from 42.8p in 2018).

RDI REIT (RDI)    
ORD PRICE:33.05pMARKET VALUE:£628m
TOUCH:33-33.1p12-MONTH HIGH:39pLOW: 31p
DIVIDEND YIELD:8.2%TRADING STOCK:nil
DISCOUNT TO NAV:22%NET DEBT:87% 
INVESTMENT PROPERTIES:£1.6bn*  
Year to 31 AugNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201437.11028.03.2
201540.684.05.13.25
201639.08.60.53.2
201740.573.53.72.6
201842.397.44.72.7
% change+4+33+27+4
Ex-div29 Nov   
Payment:18 Dec   
*Includes associate and joint venture investments