Summit Properties Share Discussion Threads

[davebowler] 03/6/2019 09:05

Liberum on Sirius (at a 3% discount to NAV compared to our 30%)


Sirius has generated a NAV total return in excess of 15% for four consecutive years. Today's results demonstrate continued strong performance with operational gains in addition to an uplift from yield compression. The company's capex investment programme is delivering significant gains and there is considerable scope to increase this across the portfolio. Approximately half of the vacant space in the portfolio is going through the capex investment programme.

The occupational market has improved over the past three years which has enabled the company to generate a material increase in both portfolio occupancy and the average rate per sqm over that period. The price achieved for the asset sales to the JV demonstrates the level of investment demand for commercial assets in Germany. Sirius remains well-placed to maintain its strong NAV performance with rising rental growth in addition to potential yield compression.

[davebowler] 30/5/2019 09:14

Liberum;
Summit Properties

Earnings on track for 20%+ uplift in 2019

Mkt Cap £506m | Prem/(disc) -34.6% | Div yield n/a

Event

Summit Properties' NAV at 31 March 2019 was €1.92 per per share, representing a 1.7% return for the period. The return was driven by recurring earnings as there was a marginal revaluation loss of €1.2m in the quarter (we believe this relates to capex spend in the period).

Rental income received in the quarter of €20.3m was 28% ahead of Q1 2018. Funds from operations (FFO) have increased by 42.6% to €14.4m (Q1 2018: €10.1m) including €1.6m from residential development profits. This is in line with previous guidance of €51-56m of FFO for 2019.

Liberum view

Summit Properties' trading update for Q1 2019 has confirmed the company is on track to deliver a significant earnings uplift in FY2019. We calculate recurring earnings of 8.5 cents per share in FY2018 after stripping out residential development profits. The run-rate implied by Q1 2019 suggests Summit will increase recurring earnings by c.24% to 10.5 cents in 2019 (excluding residential development profits).

Market conditions in the German commercial real estate market remain favourable despite lower projected GDP growth. The export-orientated manufacturing sector has driven the slowdown in growth expectations. The services sector accounts for over 70% of GDP and employment and the performance of the services sector has remained resilient. Rising office-based employment continues to drive demand for space. Over the last decade, the number of office workers in the top 7 cities has risen by almost 25%, compared to an increase of just 6% for office space. The high level of demand, in combination with a lack of supply, has driven the average vacancy rate down to 3.5%.The majority of new supply in 2019 and 2020 has already been pre-let.


Summit's discount to NAV is over 30 percentage points wider than the average for peers (Alstria, TLG Immobilien, Aroundtown SA, Dream Global Office REIT and Sirius Real Estate). We believe this is highly attractive given the quality of the portfolio and the sustainability of double-digit NAV returns over the medium-term driven by stable recurring income, asset management potential (reversionary upside, low capital values) and positive market fundamentals.

[alpal2] 30/5/2019 09:05

Can someone clarify for me:
1} EPRA €1.92 vs NAV €1.73 What's the difference?
2} Quarterly Nett profit €10.2m vs Full year 2018 €289m. Doesn't look good.

[jeff h] 26/4/2019 10:55

I am not sure how the proposed transaction will work. I was under the impression that all or a percentage of Luxco would be floated and Summit would receive cash in return for the assets, so there would be no dilution in Summit shareholdings but what price/valuation is put on Luxco we will have to wait and see.

[davebowler] 26/4/2019 09:01

Thanks.
Missed that.I worry about dilution if there is a private placement.It was disastrous for the Palace Capital (PCA) share price when they did a placement at a heavy discount.

[jeff h] 26/4/2019 08:58

Yes saw that thanks dave, though the only mention in the results was:-

The Company is considering a private placement and listing of shares in Summit Luxco S.à r.l. ("Luxco") on the regulated market of the Frankfurt Stock Exchange (Prime Standard) in 2019, subject to market conditions. Luxco currently is a wholly‐owned subsidiary of Summit and holds all of its German real estate assets, including asset and property management operations. Summit is considering the listing to provide investors with the opportunity to invest in Summit's German real estate business and to facilitate Luxco's growth in Germany through the execution of its existing development pipeline and additional acquisitions of commercial real estate properties.

[jeff h] 24/4/2019 14:38

Thanks for the Liberum update Dave.

I was hoping for some more news on the sale of shares in Luxco.

[davebowler] 24/4/2019 10:43

Liberum
Strong returns, further growth to come

Mkt Cap £460m | Prem/(disc) -38.6% | Div yield n/a

Event

Summit Properties’ 2018 results have confirmed a period of strong performance for the company. NAV per share rose by 53.8% in the year to €1.894 (December 2017: €1.231). NAV total return for the year was 56.3%, maintaining the company’s strong performance since IPO in 2013.

The principal reason for the large NAV uplift was a €297m revaluation gain over the period. We estimate a like-for-like portfolio revaluation gain of c.25% in the period as a result of yield shift and asset management activities. Operationally, the portfolio continues to perform well with a further reduction in EPRA vacancy to 7.3%. The average portfolio rent per sqm rose by 8.7% in 2018.


Cash generation from the portfolio is high with funds from operations of €44.3m in 2018, representing a 21.4% increase over the prior year. FFO per share was 9.5 cents and we calculate recurring EPS of 8.5 cents (24% increase) after stripping out gains from apartment disposals. Summit has completed over €200m of acquisitions since June (average yield of c.6.6%). We estimate these acquisitions could increase annual recurring earnings by c.20%.

Market conditions in the German commercial real estate market remain very favourable. Rising office-based employment is leading to increased demand for space. Over the last decade, the number of office workers in the top 7 cities has risen by almost 25%, compared to an increase of just 6% for office space. The high level of demand, in combination with a lack of supply, has driven the average vacancy rate down to 3.6%. The majority of new supply in 2019 and 2020 has already been pre-let. Investment demand for German commercial property remains high, aided by a supportive financing environment. Transaction volumes have exceeded €50bn for each of the past four years, and achieved a record €60bn in 2018 according to Savills data. Market forecasts indicate volumes will again exceed €50bn in 2019.


Liberum view

We note the confident outlook from the company regarding the potential for future growth. Rental growth is likely to continue due to a combination of ongoing asset management and positive market fundamentals, suggesting further increases in market rents. Even if there was no growth in market rents, there is still plenty of upside to aim for within the existing portfolio. The portfolio ERV is 28% above the current annualised rent roll.

Summit’s -38.6% discount to the December 2018 NAV is 36 percentage points wider than the -2.7% average for peers (Alstria, TLG Immobilien, Aroundtown SA, Dream Global Office REIT and Sirius Real Estate). This is despite Summit’s significantly stronger NAV performance since IPO in 2014. In our view, the outlook for sustainable double-digit NAV returns remains robust given the stable recurring income, asset management potential (reversionary upside, low capital values) and positive market fundamentals.

[davebowler] 18/4/2019 12:28

Price graph is in Euros.

[davebowler] 18/4/2019 12:28

Formerly Summit Germany