Elite Commercial REIT - Two More Lease Breaks Exercised
- Elite Commercial REIT (SGX:MXNU) reported 1H22 revenue of £18.7m, which is 17.7% growth y-o-y, mainly due to the full half-year rental contribution from its maiden acquisition on 9 March 2021. Distributable income rose 9.7% y-o-y to £12.2m, also attributable to lower tax expenses.
- Distribution per unit (DPU) of 2.56 pence declined 2.7% y-o-y on a larger unitholder base from 2.63 pence in 1H21 that included an advanced distribution of 0.9 pence.
- Elite Commercial REIT reported 3.5% upward revaluation of portfolio value to £517.7m as at 30 June 2022, from £500.1m as at 31 December 2021. NAV per unit grew to £0.62 as at 30 June 2022, from £0.61 as at 31 December 2021.
- Two more properties exercised the lease break option, bringing the total number to 12.
- Rental income secured up to March 2028 for 87.5% of portfolio by annualised gross rental income after removal of lease break options.
- Elite Commercial REIT's portfolio occupancy remains high at 98.0% as at 30 June 2022, with vacancies at John Street, Sunderland and Sidlaw House, Dundee. Manager has collected 99.9% of rent for 3Q22 in advance and within seven days of due date.
- Gearing ratio declined to 41.9% as at 30 June 2022, from 42.8% as at 31 March 2022.
- Long WALE at 5.2 years as at 30 June 2022.
Elite Commercial REIT - Earnings forecast revision and recommendation
- Cut FY23F revenue forecast for Elite Commercial REIT to GBP36.3m from GBP37.2m to factor in the new lease breaks for 2 properties (Lindsay House, Dundee and Ladywell House, Edinburgh) and our conservative assumption of zero income.
- Lower FY23F net property income (NPI) to GBP35.3m from GBP36.1m.
- FY22F/FY23F DPU lowered to 4.58/4.48 pence from 4.70/4.70 pence.
- Cost of debt assumptions increased to 2.6%/3.0% for FY23F/FY24F post re-financing.
- Maintain BUY recommendation on Upside to earnings if Elite Commercial REIT finds new tenants for the 12 properties or divests them. with lower DCF-based target price of GBP0.70.
- Upside to earnings if Elite Commercial REIT finds new tenants for the 12 properties or divests them.
Above is the excerpt from report by DBS Group Research.
Clients of DBS may access the full report in PDF @ https://www.dbs.com/insightsdirect/.
Tabitha FOO DBS Group Research | Dale LAI DBS Research | Derek TAN DBS Research | https://www.dbs.com/insightsdirect/ 2022-08-15 2022-08-15
Read also DBS's most recent report:
2022-11-08 Elite Commercial REIT - Higher Cost Of Debt To Weigh On DPU.