IREIT is currently #20 in terms of holding in my portfolio. After doing some simple analysis yesterday, I have decided to add more IREIT units in the coming days. A simple intro and highlights of IREIT can be found at the end of this blog.
IREIT attracts me because:
(1) It has a track record of 5 years as a listed company on SGX. I would consider its operations to be stable and reliable and performance is more predictable. Hence, I feel more confident in evaluating its performance.
(2) At the current price, it provides an attractive dividend yield of 7.8%.
(3) It has never missed a single half-yearly dividend distribution and its DPU has been growing over the years from 5.24 to 5.80 cents. The last 2 years DPU were stable at 5.77 and 5.80 cents
(3) Its NAV (in Euros) has also grown from 41 cents to 48 cents. At exchange rate of Euro$ 1 to SGD$ 1.53, Euro$ 0.48 is equivalent to SGD $0.734. First, it is great that their NAV is growing and second, at current price, we are not overpaying for I-Reit shares. Price/NAV = 1.015.
(4) Gearing has reduced over the years from 42.6% to 36.6%, exhibiting a prudent and strong capital management by the manager. The interest coverage ratio is very healthy at 8.4 times and the cost of debt is about 2%/year.
(5) Over 90% of their entire leases are only due for renewal in 2022 and beyond, thus providing visibility, reliability and stability of income in the next few years.
(6) It received a dose of confidence recently from a major investment by CDL in April 2019. CDL acquired 50% equity stake in the trust manager IREIT Global Group (IGG) from Tikehau Capital. The latter continues to hold the remaining 50% of IGG. CDL also purchased 12.4 % of I-Reit at $0.76 from the existing substantial shareholders, which is a premium over current price.
Rising DPU, NAV and reducing Gearing over the years is a Very Good sign. Furthermore, it has visible, reliable and stable income stream.
At this current gearing level, IREIT may be poised for a growth strategy via acquisition. This may be its next step jump and growth spurt.
With the economic slowdown globally, there may be attractive opportunities that will emerge and available to buyers who have cash on hand. In IREIT’s case, they may be able to take advantage of the low interest rate environment in Europe currently.
I have been looking at IREIT for a while already and have been hoping for a better entry point (ie. lower price). However, it seems to enjoy a fair bit of support at $0.75 and bounce back quickly to this level whenever it slipped and fall below it.
I will try to see if I can get it at below $0.75.
Introduction to I-Reit
I-Reit was listed on SGX on Aug 2014. It invests principally in income-producing real estate in Europe and has 5 properties in Germany currently. It started with the purpose of investing in real estates used primarily for office purposes but has since expanded to retail and industrial (including logistics) purposes after Tikehau Capital, a pan-European asset management and investment company, acquired a 80.0% stake in trust manager, I-Reit Global Group (IGG) Pte Ltd.