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Wednesday, November 18, 2020

Cromwell European REIT Analysis @ 18 November 2020

Basic Profile & Key Statistics

Cromwell Europen REIT (CEREIT) is a diversified REIT that invests mainly in office, industrial and logistics sectors. CEREIT owns 95 properties across 7 countries in Europe.

Performance Review

For QoQ, CEREIT performance has improved; as for YoY, gross revenue and NPI has also increased by 5.3% and 7.5% respectively. However, distributable income and DPU decreased YoY by 12.5% and 12.7% respectively.

Acquisition of logistics property in Germany has completed in August, though it wouldn't move the needle much.

Lease Profile

Occupancy is moderate at 94.3%. WALE is long at 5 years where the highest lease expiry of 64.8% falls in 2024 and beyond, without breakdown. Weighted average land lease expiry is long at 93.85 years. 

Debt Profile

Gearing ratio is slightly high at 38.8%. Cost of debt is low at 1.5% with a moderate level of unsecured debt at 73.2%. Fixed debt rate % is high at 94.2%. Interest cover ratio is high at 6.8 times. WADE is short at 2.6 years where the highest debt maturity of 43% falls in 2022. 

Diversification Profile

Top geographical and top property contributions are low at 9.1% and 8.4%. Top tenant contribution is high at 13.3% while top 10 tenants contribution is low at 33.9%. Top 3 countries contribution is from Netherlands at 25.4%, France at 22% and Italy at 21.1%.

Key Financial Metrics

Property yield and distribution on capital are high at 5.9% and 4.3% respectively. Management fee is very competitive in which unitholders receive  12.98 for every Euro paid to the manager. Distribution margin is moderate at 47.5%. 3% of the past 4 quarters DPU is from distribution from disposal, this is from the divestment gain that distributed in 1H 2020.


Slight Downtrend - Property Yield

Downtrend - DPU, NAV per Unit, Interest Cover Ratio, Distribution Margin

Relative Valuation

i) Average Dividend Yield  - Average yield at 7.90%,  apply the past 4 quarters DPU of 3.652 cents will get  0.46. 

ii) Average Price/NAV - Average value at 0.95, apply the latest NAV of  0.493 will get  0.47. 

Author's Opinion

 Favorable Less Favorable
Diversified SectorShort WADE
Long WALEConcentrated Debt Maturity
Long Weighted Average Land Lease ExpiryHigh Top Tenant Contribution
Low Cost of DebtDPU Downtrend
High Interest Cover RatioNAV per Unit Downtrend
Low Top Geographical ContributionInterest Cover Ratio Downtrend
Low Top Property ContributionDistribution Margin Downtrend
Low Top 10 Tenants Contribution 
High Property Yield 
Competitive Management Fees 
High Distribution on Capital

CEREIT performance has been improved for both QoQ and YoY in terms of gross revenue and NPI. However, YTD DPU reduced by 14% YoY despite a capital top-up from divestment gain in 1H, because manager fees and property manager fees had been paid 100% in cash for 1H period, likely same for 3Q. 

For the data centres development announcement in July, there is no detailed update at this moment. Hopefully, CEREIT could release more updates in due time.

For more information, you could refer to:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

REIT-TIREMENT Patreon - Support this blog as a Patron and get SREITs Dashboard PDF

REIT Investing Community - Facebook Group where members share and discuss REIT topic

*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions as well as loss, or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.

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