Elite Commercial REIT - CGS-CIMB Research 2023-11-07: Focusing On Building Balance Sheet Strength

• Elite Commercial REIT (SGX:MXNU) posted a 2% y-o-y increase in 9M23 revenue to £28.5m, thanks to 13.1% inflation-linked rental escalation for 136 of its 155 assets effective from Apr 2023, partly offset by income vacuum from 8 vacant assets. However, net property income was up a higher 20.4% to £32.5m with the inclusion of dilapidation settlements for nine assets.

9M23 DPU declined 25.6%

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• Elite Commercial REIT's 9M23 DPU declined 25.6% to 2.82 pence (2.53 pence based on a 90% payout ratio), 25.6% lower y-o-y. See Elite Commercial REIT's dividend dates.

Maintaining high portfolio occupancy

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• With the bulk 94.8% of its leases expiring in FY28F, Elite Commercial REIT has started early dialogues with tenants to extend and diversify these lease expiries.
• As at Oct 23, Elite Commercial REIT had concluded dilapidation settlements for nine assets, and divested five of these properties for a total of £3.4m (12.2% above valuation). Of the remaining seven vacant buildings, three of the properties, valued at £2.085m, have been earmarked for sale and the remaining are in various stages of asset management evaluation including re-leasing, asset enhancement, redevelopment or divestments.
• We believe these initiatives would enable Elite Commercial REIT to reduce holding costs of the vacated properties or pare down debt to lower its gearing and strengthen balance sheet in the near term.

De-gearing through capital recycling

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LOCK Mun Yee CGS-CIMB Research | Natalie ONG CGS-CIMB Research | https://www.cgs-cimb.com 2023-11-07 SGinvestors.io

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