DBS turns cautious on IREIT Global despite decreasing vacancy

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Despite reporting decreasing vacancy rates for its 1Q 2017 results, DBS Equity Research is cautious on Europe-focused IREIT Global, and has issued a ‘Hold’ rating on the counter in a report on 24 May.

IREIT Global announced on 11 May that it has achieved a DPU of 1.44 Singapore cents for its 1Q 2017, a decline of 8.9% compared to the 1.58 cents achieved in the corresponding period of 2016.

Gross revenue for the period also fell slightly by 0.4% to EUR8.7 million (SGD9.46 million) although net property income (NPI) increased by 3.5% to EUR7.8 million.

But the REIT expressed optimism in its statement on the results for the quarter then, citing sustained economic growth in Europe, attractive yield spreads, and better aggregate occupancy across its portfolio.

IREIT Global has also reiterated its plans to diversify by asset class, geography, tenant, and lease expiry - a move that will improve long term recurring income and earnings visibility, the REIT said then.

However despite its stellar stable of tenants that include Allianz, Deutsche Telekom, and ST Microelectronics, and an attractive indicative yield of 7.5%, DBS highlighted a number of factors that are likely to stifle the REIT’s performance in the near term.

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Ridzwan Rahmat has been analysing Singapore-listed REITs and business trusts, since 2008. For disclosure purposes, Ridzwan is currently vested in Mapletree Greater China Commercial Trust, Mapletree Industrial REIT and Mapletree Logistics Trust.

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