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What Investors Should Know About IREIT Global’s Latest Earnings and Valuation

IREIT Global (SGX: UD1U) is a REIT that has a focus on investing in office, retail, and industrial real estate in Europe. Its portfolio currently comprises five freehold commercial properties in Germany.

There are two things to know about the REIT right now: Its latest financial performance and valuation.

Financial performance

Here is a table showing important items from IREIT Global’s income statement for the fourth quarter of 2017:


Source: IREIT Global’s 2017 fourth quarter earnings press release

We can see that IREIT had a mixed quarter in the fourth quarter of 2017. There was year-on-year growth in revenue and net property income due to a firm performance from its portfolio, including a 10% rental uplift at Bonn Campus after the inflation-linked hurdle rate was crossed in December 2016.

But, there was a reduction in the REIT’s income to be distributed to unitholders, as a result of income retention which is in line with the REIT’s distribution policy. Consequently, IREIT Global’s distribution per unit fell by 7.6% year-on-year to 1.46 cents in the reporting quarter.

On a positive note, the occupancy rate of the REIT’s portfolio stood at 98.3% as of 31 December 2017, which is high. The REIT also has a long weighted average lease to expiry (WALE) of 5.1 years, with no lease expiring until after 2018.

Commenting on its prospects in its latest earnings update, IREIT Global said that the “European real estate market is likely to remain positive due to rising rents, decreasing vacancy rates and attractive spreads between property cap rates and government bond yields.” The REIT added that the German office market is “expected to benefit from firm occupier demand and growing supply shortage.”

Valuation

There are two useful valuation metrics for assessing REITs. They are the price-to-book (PB) ratio, and the distribution yield.

The table below shows IREIT Global’s PB ratio and distribution yield. It also shows the respective averages for the two valuation metrics for the 41 REITs that are in Singapore’s stock market.


Source: SGX Stock Facts

On one hand, IREIT Global’s PB is higher than average. But on the other hand, its distribution yield is better than the average of the other Singapore-listed REITs.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.