Elite UK REIT: A Promising Investment with High Yields

Elite UK REIT’s 2H/FY24 results delivered better-than-expected performance, with a distributable per share (DPS) of 1.47 and 2.87 pence, surpassing predictions by 53% and 103%, respectively. Despite challenges, such as a 0.9% year-on-year (YoY) dip in revenue attributed to vacant assets, Elite UK REIT showcased resilience. With rent escalations and cost management, its distributable income grew by 7.5%, reaching £8.47 million, a 10.5% YoY increase in DPS.

The company’s portfolio occupancy improved to 93.9% by the end of FY24, aided by the divestment of non-performing assets. Management extended WALE (weighted average lease expiry) by securing lease renewals for key properties, achieving positive rental reversions of +5% and +30%. Efforts to renegotiate the Department for Work & Pensions (DWP) lease further bolster its stability. With 88% of assets leased to front-of-house government functions, retention rates are anticipated to remain high.

Elite UK REIT also realized a 0.5% portfolio revaluation, largely driven by potential data center developments at Peel Park. Gearing was reduced to 43.4%, with a shift to 86% fixed-rate borrowings, lowering the weighted average cost of debt to 4.90%. The REIT is expected to keep borrowing costs below 5% in FY25, aided by favorable interest rate hedges and sustainability-linked loan savings. Analysts maintain an “Add” rating, raising the target price (TP) to £0.35, citing strong earnings stability and a projected FY25 dividend yield of 9.49%.

CapitaLand Ascott Trust

CapitaLand Ascott Trust (CLAS SP) continues to be a strong player in the hospitality sector. With a current price of £0.88 and a target price of £1.18, the trust boasts a market capitalization of \$2,459 million. CLAS achieved an attractive dividend yield of 7.0% for FY24F, expected to rise to 7.2% and 7.8% in FY25F and FY26F. Its 38.3% asset leverage underscores its prudent financial management. Analysts maintain an “Add” recommendation for CLAS, highlighting its robust performance and growth potential in the hospitality REIT space.

CDL Hospitality Trust

CDL Hospitality Trust (CDREIT SP) is positioned at a current price of £0.83 and a target price of £1.07. With a market cap of \$769 million and a dividend yield projected at 6.5% for FY24F, increasing to 7.1% and 7.7% for FY25F and FY26F, CDL demonstrates consistent performance. Its asset leverage stands at 38.8%, reflecting a stable financial structure. The trust maintains an “Add” rating, supported by its promising yield growth and operational resilience.

Far East Hospitality Trust

Far East Hospitality Trust (FEHT SP) has been a reliable performer in the hospitality sector. Its current price of £0.60 and target price of £0.78 reflect a positive outlook. With a market cap of \$896 million, the trust offers a consistent dividend yield of 7.0% across FY24F to FY26F. Its asset leverage stands at 30.8%, signaling a conservative approach to financial management. FEHT retains an “Add” recommendation for its stable returns and resilience in the hospitality market.

Frasers Hospitality Trust

Frasers Hospitality Trust (FHT SP) is currently priced at £0.55, with no target price set. The trust’s dividend yield is projected at 4.1% for FY24F, rising to 4.4% and 4.8% for FY25F and FY26F. With a market cap of \$773 million and 39.3% asset leverage, Frasers demonstrates cautious financial management. Although not rated, its steady growth in dividend yields highlights its potential in the hospitality REIT space.

AIMS AMP Capital Industrial REIT

AIMS AMP Capital Industrial REIT (AAREIT SP) is a solid performer in the industrial sector, offering a dividend yield of 7.4% for FY24F, which is expected to rise to 7.3% and 7.5% in the following years. With a current price of £1.29, its market cap is \$754 million, supported by an asset leverage of 33.7%. The trust remains unrated but continues to attract attention for its consistent yield performance and operational strength.

CapitaLand Ascendas REIT

CapitaLand Ascendas REIT (CLAR SP) is a leading industrial player, with a current price of £2.65 and a target price of £3.10. Its market cap stands at \$8,632 million, with a dividend yield of 5.7% for FY24F, expected to increase to 5.8% and 6.0% over the next two fiscal years. With 37.7% asset leverage, CLAR maintains an “Add” rating, emphasizing its robust growth and industry leadership.

ESR-REIT

ESR-REIT (EREIT SP) is an attractive industrial REIT, offering high dividend yields of 8.5%, 8.7%, and 9.0% for FY24F, FY25F, and FY26F, respectively. Priced at £0.25 with a target price of £0.36, it has a market cap of \$1,489 million and an asset leverage of 42.8%. Analysts maintain an “Add” rating for ESR-REIT, underscoring its ability to deliver strong returns.

Keppel DC REIT

Keppel DC REIT (KDCREIT SP) is a standout in the industrial sector, with a current price of £2.17 and a target price of £2.48. With a market cap of \$3,614 million, it offers dividend yields of 4.4%, 4.6%, and 4.7% for FY24F to FY26F. Its asset leverage of 31.5% reflects sound financial stability. Analysts give Keppel DC REIT an “Add” rating, highlighting its growth potential in data center investments.

Mapletree Logistics Trust

Mapletree Logistics Trust (MLT SP) is another significant player in the industrial sector, with a current price of £1.22 and a target price of £1.73. With a market cap of \$4,567 million, its dividend yields stand at 7.4%, 6.6%, and 6.2% for FY24F to FY26F. Its asset leverage of 40.3% underscores its stability. Analysts maintain an “Add” rating for MLT, citing its consistent yield generation and strategic positioning.

Conclusion

The REIT sector continues to provide a balanced mix of growth and stability across various segments, from hospitality to industrial and retail. Elite UK REIT, along with its peers, demonstrates strong financial management, stable dividend yields, and ESG progress, making it an attractive proposition for investors. With solid recommendations and robust fundamentals, the covered REITs stand out as valuable additions to any investment portfolio.