Wednesday, February 20, 2019

IReit Global - NAV Up By 11.6% For FY18

This is a Reit I used to own in the past because of its strong profile then divested them due to the change in the manager and the possibility of an equity call because of its high gearing.

Since then, they have done extremely well to mitigate by lowering their payout from 100% to 90% and use the excess to reduce their gearing over time.

Ireit Global announced their Q4 and FY18 results this evening which I thought continued to impress throughout both financially and operationally.

While they've taken steps to improve their aspects of the portfolio, which clearly shows from the falling revenue, NPI and increased operating expenses, they've managed to improve their distributional income due to the currency swap they've undertaken which swings in their favor.

At 5.8 cents distribution (based on 90% payout), this represents a dividend yield of about 7.5%.

The German market shows their strong resilience which resulted in NAV going up by double digit 11.6% year on year to €0.48.

This has a positive impact too on their gearing as their valuation of the properties has gone up, which resulted in a lower debt to assets ratio. 

Their gearing stands at 36.6% as at year end and has reduced a lot since I've divested them a couple of years ago when their gearing was at 40+%.

The other thing which is probably straight in their favor is the fact that their main borrowings will be due in the next 1 year, so they have started refinancing at a 1.7% (such a low interest rate still in Europe!).

If we compare this across the other Reits in today's circumstances, this probably has one of the lowest effective interest rates and will continue to be for the next few years until Europe starts to recover.

Majority of the leases will also be due for renewal only after 2022 so there's a lot of room to maneuver in respect of that.

For investors, this means there's no major overhang as both debts and lease renewal will not be an issue until a few years later from now.

My head is telling me this is a much better investment than some of the overseas Reits we have today out in the market whose valuation has gone up a lot in recent days/weeks.

I'm just slightly surprised there isn't as much news going on with the sponsor after inheriting them a few years back.

Thanks for reading.

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