Key message: Sirius’ FY24 performance met expectations, and marks a continuation of the ability of the management platform to consistently drive stable growth and strong value creation through the long-term and over multiple business cycles.

  • Operational performance: Group lfl annualized rent roll grew +7.2% y/y to EUR188.7mn (+7.1% y/y in Germany and +7.7% y/y in the UK) over FY24, with core lfl occupancy gains achieved across both Germany and the UK as the growth strategy broadly shifted from pricing to occupancy across the portfolio as inflation pressures have started to ease. There remains significant further capacity to improve occupancy across the portfolio, in our view; for example, 61% of the German portfolio by value is classified as ‘value-add’ with 81.2% occupancy against the remaining ‘mature’ portfolio (39% of value) with 94.4% occupancy. A critical component of Sirius’ asset management platform is its organic capex programme, which has unlocked EUR29.4mn of incremental rent roll on EUR70.9mn investment in sub-optimal space in the German portfolio since FY15 – an ROI exceeding 40%. The future near- to medium-term pipeline in Germany will cover c. 42 400sqm GLA of space, expected to generate EUR2.7mn incremental rent roll on EUR6.5mn investment.
  • Capital raise and acquisition pipeline: a highlight of FY24 was the GBP146.6mn (ZAR3.4bn) equity raise executed in Nov-23, which has subsequently been deployed into a substantial acquisition pipeline of properties with value-add potential across both Germany and the UK, adding c. 211 000sqm GLA of primarily light industrial space to the portfolio. Key acquisitions include Köln, Göppingen and Klipphausen in Germany for EUR53.6mn at a blended initial gross yield of 10.2% and 91% occupancy; and six properties in the UK (Liverpool, Barnsley, Islington, Camden, Finsbury Park and Vantage Point) for GBP95.6mn at an average gross yield of 9.5% and 81% occupancy. Capital recycling continued with the disposal of four mature or non-core properties, raising c. EUR60mn in gross proceeds at a combined 5% premium to book value and gross exit yield of 6.5%. Sirius had c. EUR214mn in unrestricted cash reserves available at FY24 FYE, providing significant firepower for future acquisition and capex activity.
  • Balance sheet update: group net LTV significantly reduced over the period, from 41.6% at FY23 to 33.9% at FY24, reflecting the proceeds received from the equity raise and assisted by broadly stable valuations in the portfolio. Rent roll growth outpaced the upward yield shift (+30bps) in the German portfolio, resulting in a lfl valuation gain, but marginally failed to do so in the UK portfolio where the yield shift was more severe (+60bps). Nonetheless, with easing inflation and lower interest rates anticipated to materialise in the medium-term, in our view property valuations are at or close to cyclical bottoms, and future valuation movements across the portfolio should be positive and should contribute to relatively strong NAV growth over the forecast period. Although there are no significant debt maturities in FY25 or FY26, the forthcoming maturity of the EUR400mn, 1.1% coupon unsecured bond in FY27 remains a focal point; nonetheless, we are confident that management has sufficient growth prospects and factors within its control to outpace these headwinds and maintain progressive FFO and dividend growth over the forecast period.
  • Updated forecasts: we revise our FY25E FFO per share forecast to EUR8.98c (+0.4% y/y), with growth hampered by increasing finance costs on recently refinanced debt, the temporary earnings drag from excess/undeployed cash until it is invested in accretive acquisitions, and from the increase in shares outstanding following the equity raise. Our forecast FY25E dividend per share is EUR6.23c per share (+3.0% y/y), as the flexibility in the payout ratio should assist in uplifting DPS growth. Management’s stated objective of achieving group FFO of EUR128mn is achievable in FY26 (FY24: EUR110.2mn), in our view.
  • Valuation and rating: our valuation implies a target price of EUR119.5c (ZAR24.23), suggesting a 1yr TSR return of +18.1% (5.9% dividend yield and +12.2% capital return). We continue to favour Sirius’ relatively strong NOI and NAV growth prospects (organic and inorganic), the relatively stable jurisdictions and liquid transaction markets in which it operates, its long-term track record of progressive FFO and DPS growth, and Rand-hedge qualities. We remain OVERWEIGHT.


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