According to Lai in his Feb 25 report, FY2025’s distribution per unit (DPU) of 13.39 Euro cents is slightly ahead of his projections.
“Distributions reflected higher financing costs rather than weaker property fundamentals, as net interest costs increased 25.2% following the higher coupon on the EUR500 million green bond issued in January 2025 and a higher average level of borrowings,” Lai shares.
Lai added that SERT’s unit buyback programme supported per-security outcomes, with the EUR10 million buyback cited as 1.1% accretive.
Given the pressure from refinancing being lifted at SERT, Lai understands that the REIT will shift their focus to active capital recycling following divestment of some EUR140 million being completed in 2HFY2025.
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“Given the large cash balance in excess of EUR110 million, we believe SERT will be actively looking to redeploy capital into accretive acquisitions. As such, we have assumed acquisitions of EUR70 million (proceeds from recent divestments in Slovakia) in 2HFY2026,” according to Lai.
“However, as we have only assumed a half-year contribution from the assumed acquisitions, we anticipate that there will be some drag to earnings in FY2026,” according to Lai.
Following his revised projection, he foresees a relatively flat FY2026 DPU for SERT with the half-year income contribution from the assumed acquisitions.
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“As such, we maintain our ‘buy’ recommendation on SERT with a slightly higher target price of EUR1.90. Our DCF-based valuation assumes near-term acquisitions that will support earnings in FY2026,” Lai states.
Lai’s target price suggests a forward target distribution yield in excess of 7.0% over the medium-term for SERT.
Meanwhile, Ada Lim of OCBC Group Research sees SERT "standing at an inflection point", given that FY2025's DPU is 0.8% higher than her full year forecast, which she deemed to be in line with her expectations.
In her Feb 27 report, she added that portfolio constitution is likely to be front and centre in FY2026 for SERT as management is evaluating over EUR70 million of near-term acquisitions, alongside a potential divestment pipeline of a similar quantum targeted for the year, as it continues to increase its exposure to logistics & industrial and data centre assets from 59.3% of the portfolio currently to 70%.
"Management has guided for FY2026 DPU to be “broadly in line” with that of FY2025, which would mark the first year of DPU stabilisation since FY2023. Much will be dependent on management’s ability to divest well and recycle proceeds into high quality assets in an accretive manner, in our view," says Lim.
"Moreover, SERT’s early investment in AiOnX will likely be a driver of its NAV in the medium to long term," Lim adds.
Hence, Lim revised upwards her FY2026 DPU for SERT by 0.5% while FY2027 DPU is moderated by 4.5%. With a lower cost of equity input, she is keeping "buy" on SERT and her fair value estimate inches up marginally from EUR1.87 to EUR1.88.
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Lastly, Lock Mun Yee and Li Jialin of CGS International sees SERT's 2HFY2025 and FY2025 DPU broadly in line at 51.7% and 101.3% of their FY2025 forecast.
Both Lock and Li believes that the progressive development of the greenfield data centres from its investment in AiOnX data centre development fund and redevelopment opportunities in Netherlands and France could drive significant longer-term NAV accretion for SERT.
As such, both analysts lower their FY2026 and FY2027 DPU by 1.2% and 5.2% respectively to factor in asset divestments. The team reiterate "add" on SERT with a higher DDM and RNAV blended target price of EUR1.94 on the back of slightly higher RNAV assumptions given the latest update arising from SERT’s AiOnX investment and redevelopment plans.
"We like SERT’s clear divestment and redevelopment strategies to rebalance its portfolio to an industrial/Grade A office bias," the team concludes.
As at 2.38pm, units in SERT’s European counter are trading 1 Euro cent higher, or 0.6% up at EUR1.67. Units in SERT are trading up 2 cents or 0.8% higher at $2.50.
