DBS Group Research analysts Dale Lai, Rachel Tan and Derek Tan have re-initiated coverage on Cromwell European REIT (CEREIT) at “buy” with a target price of 60 Euro cents (95.9 cents), as they view the REIT as a play for the fast-growing logistics sector.

The target price is based on a discounted cash flow (DCF) model with a weighted average cost of capital (WACC) of 5.7%, and implies a target yield of 5.9% and a price-to-net asset value (P/NAV) multiple of 1.18 times.

CEREIT is the first Singapore REIT (S-REIT) with a diversified pan-European portfolio comprising office, industrial and logistics assets valued at around EUR2.3 billion ($3.68 billion).

Its 107 properties are located in major gateway cities in countries including the Netherlands, Italy, France, Poland and Denmark.

Since its listing in November 2017, the REIT’s portfolio has grown by around 70% from EUR1.35 billion.


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“The REIT has been an active asset recycler, driving portfolio yields and optimising returns to unitholders. With attractive yields north of 7.5%, coupled with potential inclusion to the EPRA NAREIT, we see multiple re-rating catalysts for the stock,” write the team in a May 3 report.

One of the potential catalysts identified by the team is the enlarged free float market cap and trading liquidity to lead the charge for inclusion into the EPRA/NAREIT Developed Asia index.

The REIT has also weathered the Covid-19 pandemic well, with “resilient occupancies” and achieving positive rental reversions.

The REIT currently has a weighted average lease expiry (WALE) of 4.9 years with strong visibility on distributions.


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With that, the team anticipates an improvement in operational metrics as the economy recovers from the Covid-19 pandemic.

“We remain excited on management’s pivot into the logistics sector which accounted for 35% of assets as of December 2020,” it writes.

“The REIT continues to increase exposure in this fast-growing subsector and targets to increase its portfolio exposure to 50% in the medium term. This strategy, in our view, will drive a further compression in yields for the stock,” adds the team.

As at 12.54pm, units in CEREIT are trading flat at 47.5 Euro cents.