S-REITs Weekly - UOB Kay Hian 2020-07-06: 2.4% Gain Due To The Gradual Easing Under Phase 2 Of Re-opening

S-REITs Weekly - UOB Kay Hian Research | SGinvestors.io IREIT GLOBAL (SGX:UD1U)

S-REITs Weekly - 2.4% Gain Due To The Gradual Easing Under Phase 2 Of Re-opening


UOBKH S-REIT Index gained 2.4% wow to 253.7 last week.

  • The government has allowed tourist attractions, such as the Flower Dome at Gardens by the Bay, the River Safari, Singapore Zoo, ArtScience Museum, Sands SkyPark and Observation Deck, the casino at Marina Bay Sands, Universal Studios Singapore, the S.E.A. Aquarium and the casino at Resorts World Sentosa, to reopen from 1 Jul 20 (restricted to 25% of operating capacity). Cinemas will be allowed to reopen from 13 Jul 20. Seats are reconfigured to ensure safe distancing of at least 1m and a maximum of up to five persons can be seated together.
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  • IREIT Global (SGX:UD1U) is a pure play on office properties in Europe. It has nine freehold office assets in Germany and Spain, which accounted for 91.2% and 8.8% of asset under management (AUM) respectively. Its portfolio has a total attributable lettable area of 230,000sqm and valuation of €630.2m.

Income stability backed by long leases with blue-chip tenants.

  • IREIT Global’s two key tenants, Deutsche Telekom and Deutsche Rentenversicherung Bund (DRV), accounted for 77.4% of gross rental income as of Mar 20. They are sticky tenants as the Berlin campus and Bonn campus are built-to-suit to cater to Deutsche Telkom and DRV’s specific requirements.
  • Deutche Telekom is a global telco player, while DRV is Europe’s largest pension insurance company. Blue-chip tenants, including Allianz, ST Microelectronics and Ebase, accounted for 87.8% of gross rental income. Only 3.5% of leases will expire in 2020-21. The portfolio has a long WALE of 3.9 years.

Portfolio resilient despite COVID-19 pandemic.

  • IREIT Global’s predominantly blue-chip tenant base has minimised the impact from the ongoing COVID-19 pandemic. There has been no early termination by any tenants due to the pandemic. 98% of portfolio rents in April and May were already collected. Requests for rental rebates and deferrals accounted for only 2% of IREIT Global’s total rents and came mainly from its Spanish portfolio. Germany and Spain have started to ease lockdown restrictions, having successfully flattened the curve and contained the spread of COVID-19.

Support from CityDev and Tikehau Capital drives future growth.

Offers lucrative yield spread.

  • Consensus estimate for IREIT Global’s DPU is 4.0 € cents for 2020 and 4.0 € cents for 2021, implying attractive distribution yields of 8.5% for 2020 and 8.5% for 2021. Yield spreads are 8.9% for 2020 and 8.9% for 2021, above the yield for 10-year German bunds of -0.4%.
  • See more details in report: IREIT Global - UOB Kay Hian 2020-07-01: Resiliency From Blue-Chip Tenants.
  • IREIT Global deserves to trade at a lower yield, given that Germany and Spain have successfully contained the spread of COVID-19.

Jonathan KOH CFA UOB Kay Hian Research | Peihao LOKE UOB Kay Hian | https://research.uobkayhian.com/ 2020-07-06
SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 99998.000 SAME 99998.000