Brokers’ take: RHB cuts IReit Global target by 14.9% on near-term challenges
The analyst lowers dividends per unit forecasts by 5 to 6% for the 2025 to 2026 financial years
RHB Research cut its target price for IReit Global by 14.9 per cent to S$0.40 from S$0.47, but maintained its “buy” call, it said in a report on Thursday (Jul 11).
The new target, which represents a 35.6 per cent upside from its current unit price, follows last month’s announcement by the real estate investment trust (Reit) that its key tenant would not extend its lease on Berlin Campus. Berlin Campus, located just outside Berlin’s city centre, is a complex of buildings used mainly for offices.
While the research house was unsurprised by the announcement, it pointed out that the tenant’s departure – amid a tough macro and funding climate – triggered a decline in the Reit’s stock price.
Factoring in the tenant’s exit and assuming a S$5 million in rental top-up, analyst Vijay Natarajan lowered his dividends per unit forecasts by 5 to 6 per cent for the 2025 to 2026 financial years.
He also raised his cost of equity assumption by 100 basis points on development risks.
In June, IReit Global’s manager said it plans to proceed with its proposal to convert Berlin Campus into a mixed-use urban precinct.
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In Natarajan’s view, the redevelopment is a medium-term positive move that could unlock the asset’s undervalued potential.
“With IReit Global providing greater-clarity capital expenditure (capex) needs, the returns potential will likely act as a share-price catalyst,” he added.
He noted that potential capex for the redevelopment could come to 150 million to 200 million euros (S$219.1 million to S$292 million), spread across the estimated project time frame of 12 to 24 months.
Natarajan also said he believes IReit Global will jointly develop the project with its two capable sponsors or outside investors. This would allow the Reit to monetise a portion of the asset and reduce capex outlay and risks.
Units of IReit Global were trading 1.7 per cent or S$0.005 higher at S$0.295, before the mid-day trading break on Friday.
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