CFA Society Singapore
SINGAPORE (Mar 18): DBS Group Research is reiterating its “buy” call on Cromwell European REIT (CERT) with a lower target price of 59 Euro cents, from 66 Euro cents previously.
In a Friday report, analyst Mervin Song says, “We continue to be bullish on CERT’s prospects, given an attractive 8.5% FY19F forward yield with further upside to our DPU estimates should CERT execute its previously announced asset recycling of disposing some of its smaller and lower-yielding properties into better quality properties.”
Given the more downbeat Eurozone macro outlook coupled with the overhang from the impact from a recent rights issue, most investors have shown concerns regarding the trust’s prospects. But the analyst believes that the 16% correction in share price would have reflected most of the negatives.
“With a recapitalised balance sheet, we see investors’ confidence returning over time as management set out to establish a track record of value accretive acquisitions to drive earnings and NAV,” says Song.
With a portfolio WALE of 4.6 years along with a forward dividend yield of more than 8.0%, the trust’s dividend yields are relatively secured. And as the management delivers on its value enhancing acquisition strategy over time, Song expects a steady rise in share price.
He believes that if CERT delivers a 17% y-o-y increase in its DPU in 2019, as per forecasted, it will help demonstrate to investors the benefits from recent acquisitions.
As at 11.15am, units in CERT are trading at 50 Euro cents, or 14.6 times FY19 earnings with a distribution yield of 8.5%.