Key message: Sirius delivered impressive group FFO growth in FY25 (+11.8% y/y) – driven by acquisitive growth, yield-enhancing capex initiatives and strong operating and financial performance of the German and UK portfolios. With the dilutive impact of the FY25 equity raise now in the base (which contributed to a y/y decline in FFO per share) and the upcoming maturity of the EUR400mn bond in Jun-26 (FY27) covered by the proceeds of the new EUR350mn bond issued in Jan-25 and available cash, the group is poised to resume its positive growth trajectory in FY26 and beyond, based on continued stable core performance and ongoing inorganic growth.
- Strong core performance, aided by inorganic growth: Sirius’ group FFO by grew by +11.8% y/y, driven by annualised lfl rent roll growth of +6.3% y/y (Germany +6.1%, UK +6.6%) and EUR153.3mn of accretive acquisitions completed during the period at a blended net initial yield of 10.4%. Management’s focus on an occupancy-led strategy in FY25 was the primary driver of rent roll growth, with clear lfl improvements in Germany and the UK, although lfl average rental rate growth remains strong and well ahead of inflation (+4.4% y/y at group level). Growth in NAV per share exceeded our forecasts, with pleasing valuation uplifts (particularly in Germany) primarily generated from asset management and capex-led initiatives as yields were broadly stable. FFO growth (on a per share level) should be positive over the forecast period, in our view, as the impact of future accretive acquisitions, yield-enhancing capex projects, stable rental rate growth and occupancy improvements should outpace the increase in net finance costs as its unsecured bonds mature in FY27 and FY29.
- Management has outlined its medium-term ambition to reach group FFO of EUR150mn: based on management’s stated strategy to drive growth from a substantial and achievable acquisition pipeline (with an adequate unrestricted cash balance in place without a significant need for new debt or equity capital for the foreseeable future), along with uplifts to the rent roll through occupancy and pricing initiatives and the accretive organic portfolio capex programme, in our view this target is achievable in FY29. This ambition is in sight even after factoring an expected increase of c. EU26mn to net finance costs over the forecast period, as well as c. EUR8mn of increased corporate overheads, per management guidance.
- Updated forecasts: our revised FY26E FFO per share forecast is EUR8.81c (+4.4% y/y), growing to EUR9.29c (+5.4% y/y) in FY27E and EUR9.67c (+4.1% y/y) in FY28E. Even though we expect the group to gradually taper its payout ratio towards the historic 65% target in the medium- to long-term (FY25: 73%), dividends should nonetheless continue to grow progressively over the forecast period – maintaining the group’s impressive historic record.
- Valuation and rating: our revised target price is EUR123.3c or ZAR26.19 translated at EUR/ZAR spot. This implies a one-year TSR of +21.0%, comprised of 5.9% income yield and +15.1% capital return, which ranks in the top quartile of our ranking table. Sirius’ share price has outperformed so far in 2025 (+27.1% YTD vs. +4.0% for the SAPY) and we expect this momentum to broadly continue as the platform is set to deliver strong value creation from ongoing strategic initiatives – despite tepid economic growth conditions prevailing in its core markets. In the medium- to long-term, we expect economic growth to moderately improve in Germany and the UK resulting from infrastructure and defence spending initiatives, which should directly benefit Sirius’ portfolio, although the impact of the global tariff war (and the resulting effect on tenant performance) remains a key macroeconomic uncertainty and presents potential headwinds to growth prospects.