Sirius Real Estate's continued receipt of a BBB rating from agency Fitch is encouraging especially in the current environment, says broker Berenberg.
Fitch acknowledged the LFL rental growth for 2023 of 7.3% in Sirius’s German portfolio (80% of the total) and 8.5% in the UK and highlighted that current rental levels remain affordable for the company’s diversified tenant base, particularly for small and medium enterprises (SMEs).
Accordingly, Sirius’s exposure to offices, which accounts for about one-third of its German business park portfolio, has not been materially affected by the trend of working from home.
"Expecting Sirius to sustain the underlying financial strategy and to at least safeguard the investment-grade rating of BBB, we keep our positive view on the stock, which currently trades at an earnings yield of around 10%" said the broker.
Berenberg also noted that Fitch acknowledged Sirius’s good track record in asset management, reflected in consistent annual rent growth.
“Positively, the company’s financial profile was described as “robust” with Fitch expecting leverage, which is measured by the net debt/EBITDA, to return to below 8.0 times at the end of fiscal 2023 and to remain in the range of 7.0-8.0 times throughout the next three fiscal years.
'Buy' with a 123p target is Berenberg’s view.