Brokers' take: DBS reinitiates 'buy' on 'emerging logistics play' Cromwell E-Reit

DBS Group Research on Monday reinitiated coverage on Cromwell European Real Estate Investment Trust (Cromwell E-Reit) with "buy" and a target price of 60 euro cents.

The target price implies a target yield of 5.9 per cent and price to net asset value multiple of 1.18 times. Units of Cromwell E-Reit closed flat at 47.5 euro cents on Monday.

The reinitiating of coverage comes as the research team "remains excited" about the Reit manager's pivot into the logistics sector, which accounted for about 35 per cent of assets as at December 2020.

"The Reit continues to increase exposure in this fast-growing sub sector and targets to increase its portfolio exposure to 50 per cent in the medium term," DBS said. It added that this strategy will drive a "further compression" in yields for Cromwell E-Reit.

DBS noted that Cromwell E-Reit has been an active asset recycler. With attractive yields north of 7.5 per cent, coupled with a potential inclusion to the FTSE EPRA/Nareit Global Real Estate Index, the research team sees multiple rerating catalysts for the Reit.

The research team is also of the view that the Reit has weathered the Covid-19 pandemic well, reporting resilient occupancies and achieving positive rental reversions. Cromwell E-Reit has a weighted average lease expiry of around 4.9 years, offering strong visibility to distributions, DBS said.

"We anticipate operational metrics improvement as the economy rebounds beyond the Covid-19 pandemic," the research team noted.