Key message: Sirius released an operating update for the 1H FY26 trading period. The group is performing in line with expectations, with steady core growth (lfl rent roll +5.2% y/y) enhanced by the impact of recent acquisitions, leading to +15.2% y/y growth in group rent roll for the period. The group remains on track to achieve its EUR150mn FFO ambition by FY29, in our view.
- Sirius achieves +15.2% y/y increase in rent roll: the group managed to grow its rent roll by +15.2% y/y in 1H FY26, primarily driven by the impact of acquisitive growth: during 2025 so far, the group has secured close to EUR300mn of property acquisitions, including Hartlebury (GBP101.1mn at a 6.5% net initial yield), Chalcroft (GBP42.8mn, 5.5%) and Bedford Heights (GBP16.1mn, 9.5%) in the UK; and Dresden (EUR23.4mn, 9.1%), Mönchengladbach (EUR17.5mn, 8.0%), Geilenkirchen (EUR12.9mn, 9.3%) and Lübeck (EUR12.4mn, 8.1%) in Germany. While the proceeds of the Nov-23 and Jul-24 equity raises have now been largely fully allocated towards this acquisitive growth streak, the group maintains capacity to acquire further property assets following its recent EUR105mn (nominal value) tap issue of its bond series due in Nov-28 (FY29), which was priced at a 1.75% coupon and c. 3.5% YTM. With net LTV last reported at 31.4% at FY25 FYE and material valuation uplifts expected in the German portfolio over FY26 (with flat to limited growth coming from the UK portfolio), the group maintains sufficient capacity to drive further inorganic growth over the next c. 6 months without straining the balance sheet, in our view; the proceeds from potential capital recycling and asset disposals would provide additional firepower.
- Core portfolio continues to deliver stable growth with +5.2% y/y increase in lfl group rent roll: in addition to the significant impact of acquisitions, the group has maintained its long-term track record of delivering lfl core rent roll growth in excess of +5% y/y. Similar levels of growth were achieved in both Germany and the UK; this is despite operating conditions in the UK market being significantly more challenging overall, and the typical experience of seasonality which leads to higher move-outs and lower leasing volumes in the German portfolio in 1H versus 2H of each financial year. We highlight that Vantage Point in the UK (acquired in Apr-24) was excluded from this lfl comparison, as the site’s single largest tenant from the time of acquisition has vacated (with around half of its foregone rental income already replaced by new tenants) while the remaining vacant space undergoes a significant structural refurbishment to enhance the quality and attractiveness of the site for prospective tenants. Even if included, UK (and group) rent roll growth would have been comfortably positive. While we expect some opportunistic acquisitive growth to come through over the rest of FY26 and into FY27, in our view much of the focus will turn to executing asset management initiatives across the core portfolio (especially on recently acquired assets), including driving occupancy and rental rate uplifts, optimising service charge leakage or revising property layout and profile to match market demand conditions.
- Updated forecasts and valuation: we have revised our forecasts since our last report (released on 04-Jun-25) to reflect the details of announced acquisitions (including Geilenkirchen, Dresden, Bedford, Hartlebury and Chalcroft) and the impact of the EUR105mn bond tap issue. Our FFO, dividend and NAV per share forecasts over the FY26-28E period are materially unchanged, although we have slightly reduced our valuation and target price to reflect the modest deterioration in key valuation inputs (such as German and UK 10yr bond yields) since our last update. Our current target price (ZAR25.11) implies a one-year total shareholder return of +19.5%, comprised of 6.1% dividend yield and +13.3% capital return.