Cromwell European REIT - Divestment Plans Set In Motion; BUY

Cromwell European REIT - RHB Invest 2023-07-03: Divestment Plans Set In Motion; BUY

Cromwell European REIT - Divestment Plans Set In Motion; BUY

SGinvestors.io

Published: 2023-07-04 09:27 PM

Cromwell REIT (SGX:CWBU)

Cromwell European REIT (SGX:CWBU)’s DPU-accretive divestment of its Italian office asset is a positive move and one in line with its stated strategy of rebalancing its portfolio towards the industrial (logistics) sector. We expect it to hive off 2-3 more assets this year, mostly from the Italian portfolio.
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Cromwell REIT's share price is trading at an attractive ~35% discount to book value and offers >10% dividend yields.

Cromwell REIT's portfolio rebalancing on track.

Cromwell European REIT has sold Piazza Affari 2 (PA2), the third largest office building in its portfolio (3.7% of total portfolio value).
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The divestment is DPU-accretive at +2.1%, as the exit NPI yield is low at 2.7%, assuming that proceeds will be fully used to repay its revolving credit facilities (interest rate of ~4.5%). This would also slightly lift its weighted average lease expiry to 4.49 years.

With the divestment of PA2, light industrial and logistics will become Cromwell European REIT’s largest real estate segment, at 48.3% of its total portfolio (from 46.4%) – followed by office (46.7%) and others (5.1%).

Management had earlier unveiled a medium-term strategy of tilting 60% of its portfolio weight to light industrial/logistics, and high-quality grade-A office assets will make up the remainder. This will be mostly achieved by selling non-core assets (target to sell EUR400m worth of properties in the next two years) and from ongoing asset redevelopments.

Cromwell European REIT has also entered into a conditional sale agreement regarding its asset in Bari, Italy with Italian government. The asset was valued at EUR73.3m as at end-Dec 2022, but we gather from local news sources that the divestment is likely to be a premium to its valuation.

Gearing to drop to 37.2%

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Above is an excerpt from a report by RHB Securities Research.
Clients of RHB may be the first to access the full PDF report @ https://www.rhbtradesmart.com/.

SGinvestors.io

Vijay Natarajan RHB Securities Research | https://www.rhbgroup.com/ 2023-07-03

Read also RHB's most recent report:
2025-03-10 Stoneweg European REIT - A New Beginning With The Same Rigour; BUY.

Previous report by RHB:
2024-11-13 Cromwell European REIT - Maintaining Its Pole Position; BUY.

Price targets by other brokers at Cromwell REIT Target Prices.

Listing of research reports at Cromwell REIT Analyst Reports.

Relevant links:
Cromwell REIT Share Price History,
Cromwell REIT Announcements,
Cromwell REIT Dividend Payout Dates & Corporate Actions,
Cromwell REIT News