DBS Group Research is keeping its “buy” call on Cromwell European REIT (CEREIT) with a target price of EUR2.60 ($3.65), as analysts Dale Lai and Derek Tan remain confident on the REIT’s operating performance and higher valuations backed by a growing income.
“Faced with a slowing economy and weakening EUR, the REIT’s year to date (ytd) 20% decline in its share price appears to have priced in most of these risks,” says the analysts, while noting that yields have expanded over 1 standard deviation (s.d.) above normal to about 8.1%, which they view as attractive.
Despite the continued weakness seen in the REIT’s office portfolio (mainly in Poland and Finland), its growing light industrial/logistics portfolio has led to earnings growth. With record low vacancies for logistics properties across Europe, the analysts believe that it would drive further growth in occupancies and rents for CEREIT’s light industrial/logistics portfolio.