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Green REIT undervalued?

  • 12-12-2016 6:42pm
    #1
    cork93
    Registered Users, Registered Users 2 Posts: 35 ✭


    I'm wondering if anyone else agrees that Green REIT plc shares are currently undervalued at €1.30.

    By my very conservative estimates shares should generate a minimum of 3.5% (of NAV) return pa. I know this is a low return but I do not see many risks and it's still a lot better than current interest rates. The €1.30 share price is a significant discount to NAV.

    Admittedly I'm far from an expert so just wondering if anyone has thoughts on why Green REIT shares aren't trading higher? I'm considering increasing my stake.
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Comments

  • #2
    newacc2015
    Closed Accounts Posts: 2,379 ✭✭✭newacc2015


    cork93 wrote: »
    I'm wondering if anyone else agrees that Green REIT plc shares are currently undervalued at €1.30.

    By my very conservative estimates shares should generate a minimum of 3.5% (of NAV) return pa. I know this is a low return but I do not see many risks and it's still a lot better than current interest rates. The €1.30 share price is a significant discount to NAV.

    Admittedly I'm far from an expert so just wondering if anyone has thoughts on why Green REIT shares aren't trading higher? I'm considering increasing my stake.

    I dont know why they arent higher either. REITs are affected by interest rate changes as they can be levered up to 50% here. Interest rates are expected to rise in the US. But it doesn't explain why they would rise here or effect the share price

    There is a lot of commerical building happening in Dublin which will slow the massive commerical rent increases. But Brexit could increase the demand for offices in Dublin.

    I say the bigger factor is maybe fear from tax changes to funds by the Government. I say investors of REITs are afraid these funds will start to dump their property holding.


  • #3
    Nody
    Moderators, Category Moderators, Arts Moderators, Business & Finance Moderators, Entertainment Moderators, Society & Culture Moderators Posts: 18,375 CMod ✭✭✭✭Nody


    Without digging into their balance sheet but why would anyone want to buy a REIT for 3.5% when you can get a bigger and better diversified one for 6%+? This is before we start in on the fact USD is likely to strengthen against the euro making US REITs even more attractive in terms of dividend for capital in general and the fact you can buy AAA stock like J&J, Nestle etc. with similar dividend and better dividend growth opportunities esp. as Green's profits are falling.


  • #4
    daheff
    Registered Users, Registered Users 2 Posts: 5,933 ✭✭✭daheff


    Nody wrote: »
    Without digging into their balance sheet but why would anyone want to buy a REIT for 3.5%


    For exposure to the Irish property market
    For diversification
    To avoid USD/EUR FX fluctuations


  • #5
    scheister
    Registered Users, Registered Users 2 Posts: 1,310 ✭✭✭scheister


    daheff wrote: »
    For exposure to the Irish property market
    For diversification
    To avoid USD/EUR FX fluctuations

    im looking at the reits atm. my reasoning is that im looking at the longer term investment rather then quick turnaround.

    Over the long term property prices will increase and pending something drastic happening their will also be a demand for commercial property in Ireland. In the more medium term the small bits of dividends they pay out each year will do for a little bit of cashflow for more shares or simple make me feel like i am getting a return for my money.
    For the 2016 account while they are meant to pay out 85% of rental profit they actually paid out 100%.
    Also if you look at the rental book the average lease is 7 years


  • #6
    newacc2015
    Closed Accounts Posts: 2,379 ✭✭✭newacc2015


    Nody wrote: »
    Without digging into their balance sheet but why would anyone want to buy a REIT for 3.5% when you can get a bigger and better diversified one for 6%+? This is before we start in on the fact USD is likely to strengthen against the euro making US REITs even more attractive in terms of dividend for capital in general and the fact you can buy AAA stock like J&J, Nestle etc. with similar dividend and better dividend growth opportunities esp. as Green's profits are falling.

    If you look at their balance sheet. They are trading below their book value. Irish REITs are not paying out like an American REIT would. An REIT should have a payout ratio of around 80-90%. In Ireland is half of that

    A lot of American REITs are horrific. They own depreciating assets like strip malls, property in secondary and tertiary cities. Where as Irish REITs tend to be primary real estate in Dublin (they are all around 80% of assets in Dublin).

    Irish REITs should get better as their developments come on stream and the fact they all brought their property management in house.


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