Elite UK REIT - RHB Invest 2024-07-23: Turning Around With Tailwinds; BUY

• Elite UK REIT (SGX:MXNU) – the only pure-play UK REIT focusing mainly on social infrastructure assets – is on a firm recovery path after addressing key issues of lease renewals, gearing, and debt refinancing.
• - Read this at SGinvestors.io -

Income certainty till mid-2028, with ~97% of its UK government-backed leases locked in until then.

• A key investor concern: The concentration risk of government leases and likelihood of lease renewals in 2028.
• Based on our recent ground visit, and management and tenant discussions, we see a strong likelihood of above 90% of such leases being renewed for the longer term before expiry.
• Management of Elite UK REIT is aware of this overhang, and is proactively working with local authorities and government bodies to de-risk this before end 2026.

DPU to turn around in FY25.

• - Read this at SGinvestors.io -
• With planned disposals of vacant assets by early next year, we expect operational costs to lower significantly and result in higher FY25 net property income (NPI) margins, while financing costs ought to stabilise from anticipated rate cuts, resulting in a sustained earnings turnaround.

Moving towards ~40% gearing target with good sponsors and major shareholders’ support.

• Read more at SGinvestors.io.

Vijay Natarajan RHB Securities Research | https://www.rhbgroup.com/ 2024-07-23 SGinvestors.io

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