Secure Income REIT’s (SIR) FY16 results show income in line with expectations and 14.4% NAV growth per share. SIR has some of the longest leases in the sector, on either fixed or uncapped, upward-only RPI-linked rent reviews. Fixed debt and formulaic advisory costs lead to high predictability and lock in profits to support a rising and dependable dividend. Despite a material valuation gain, portfolio net initial yield was flat year-on-year as yield tightening on existing assets was offset by the acquisition of the Travelodge portfolio in October at a 7% yield. While the market appears to value SIR in line with long-lease peers on an earnings yield basis, the strong likelihood of NAV appreciation driven by rising rents may not be fully recognised. Our forecasts support the manager’s expectation of 11% compounded annual NAV and dividend returns to 2021.


Sign up for free to access
Get access to the latest equity research in real-time from 12 commissioned providers.
Get access to the latest equity research in real-time from 12 commissioned providers.
Easy to predict, very hard to emulate
- Published:
21 Mar 2017 -
Author:
Julian Roberts -
Pages:
9 -
Secure Income REIT’s (SIR) FY16 results show income in line with expectations and 14.4% NAV growth per share. SIR has some of the longest leases in the sector, on either fixed or uncapped, upward-only RPI-linked rent reviews. Fixed debt and formulaic advisory costs lead to high predictability and lock in profits to support a rising and dependable dividend. Despite a material valuation gain, portfolio net initial yield was flat year-on-year as yield tightening on existing assets was offset by the acquisition of the Travelodge portfolio in October at a 7% yield. While the market appears to value SIR in line with long-lease peers on an earnings yield basis, the strong likelihood of NAV appreciation driven by rising rents may not be fully recognised. Our forecasts support the manager’s expectation of 11% compounded annual NAV and dividend returns to 2021.