Elite Commercial REIT - DBS Research 2022-11-08: Higher Cost Of Debt To Weigh On DPU

Elite Commercial REIT - Higher Cost Of Debt To Weigh On DPU

  • Elite Commercial REIT (SGX:MXNU) reported 9M22 revenue of £27.9m, with 3Q22 revenue dipping slightly q-o-q to £9.2m from £9.5m in 2Q22 due to vacancies at John Street, Sunderland and Sidlaw House, Dundee.
  • 9M22 distributable income remained flattish y-o-y at £18.2m, driven by a full period of rental contribution from the maiden acquisition and tax savings, but offset by election of the Manager’s fees in cash, increased borrowings and higher interest cost, marginally lower occupancy rate and enlarged equity base.
  • 9M22 distribution per unit (DPU) of 3.79 pence declined 7.8% y-o-y on a larger unitholder base from 4.11 pence in 9M21.
  • Elite Commercial REIT's NAV per unit remained constant at £0.61 as at 30 September 2022, gearing ratio also remained constant at 41.9% as at 30 September 2022.
  • Elite Commercial REIT reported high portfolio occupancy at 97.9% as at 30 September 2022 with 99.9% of rent for 4Q22 paid in advance and within seven days of due date, and also long WALE at 5.0 years as at 30 September 2022.

Elite Commercial REIT – Earnings revision and recommendation

  • FY23F/FY24F revenue forecast for Elite Commercial REIT is increased slightly to £36.9m/£37.1m to factor in higher inflation-linked rental uplifts in Mar 2023 of 15% (previously: 11%).
  • FY22F/FY23F/FY24F borrowing costs raised to 2.6%/4.2%/4.5% post refinancing in FY23F to account for rising interest rates on floating debt, risk-free rate assumption is lifted to 3.5%.
  • Elite Commercial REIT completed the extension of £94m in borrowings ahead of January 2023 maturity, with new maturity in January 2025 and a built-in extension option of one year subject to certain financial covenants.
  • We lower Elite Commercial REIT's FY23F/FY24F DPU forecast by 10-11% to 3.98/3.87 pence, implying a 15% y-o-y drop in FY23F DPU from FY22 and 3% y-o-y drop in FY24F DPU from FY23.
  • Downgrade Elite Commercial REIT to HOLD with lower DCF-based target price of £0.53 as higher cost of debt weighs on DPU going forward.

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 | Derek TAN DBS Research | https://www.dbs.com/insightsdirect/ 2022-11-08

Previous report by DBS:
2022-08-15 Elite Commercial REIT - Two More Lease Breaks Exercised.

Price targets by other brokers at Elite Commercial REIT Target Prices.
Listing of research reports at Elite Commercial REIT Analyst Reports.

Relevant links:
Elite Commercial REIT Share Price History,
Elite Commercial REIT Announcements,
Elite Commercial REIT Dividends & Corporate Actions,
Elite Commercial REIT News Articles

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