DBS Bank has maintained a ‘Hold’ rating on Singapore-listed IREIT Global, citing uncertainty over the REIT’s new sponsor.
The bank noted that while IREIT’s yield, which is currently in excess of 8%, is attractive, there is uncertainty over the direction that will be taken by Tikehau Capital.
The European investment manager became the REIT’s sponsor after acquiring 80% of its manager earlier in the year, and has indicated that it will expand IREIT’s investment mandate to cover all commercial property types, and across Europe.
This uncertainty in direction will likely cap IREIT’s near-term share price performance, said DBS on 24 November.
“Furthermore, with IREIT’s gearing at [circa]42%, any growth plans is likely to entail an equity-raising exercise to fund the acquisition of new properties in Europe, which may be DPU dilutive in the near term, given IREIT’s already high distribution yield”, it added.
However DBS expects IREIT’s DPU for FY 2016 to increase by 21% on full-year contribution from a Berlin property which was acquired in mid-2015.
DBS also highlighted the REIT’s weighted average lease expiry (WALE) by gross rental income of 6.2 years, and a stable portfolio of blue chip tenants, such as Allianz, Deutsche Telekom, and ST Microelectronics, as positive indicators.
The bank has lowered its target price on IREIT Global to SGD0.75, from SGD0.77 previously.
Units of the REIT finished the trading day unchanged from its previous close on the Singapore Exchange at SGD0.72.