ALPH : Assessing REITs16 Mar 2013 16:45
5. How does ALPH Compare with other Commercial REITs listed in UK ?
>>>> The purpose of all this is so that we could assess the relative attractiveness of UK listed commercial REITS
>>>> Due to time restrictions I have utilized the FFO yield and not AFFO Yield in these comparison.
ALPH >>>> Market Cap = 6.99, FFO = 23.004 , FFO Yield = 329 .10%
TEIF >>>> Market Cap = 49, FFO = 24.31 , FFO Yield = 49.61%
ABL >>>> Market Cap = 30.81, FFO = 24.294 , FFO Yield = 78.85%
FCPT >>>> Market Cap = 714.6, FFO = 59.168 , FFO Yield = 8.28%
SRE >>>> Market Cap = 58.74, FFO = 47.772 , FFO Yield = 81.33%
UKCM >>>> Market Cap = 802.95, FFO = 73.972 , FFO Yield = 9.21%
>>>> There is an abnormally high FFO yield of 329.10% compared with all others, why?
>>>> Two reasons, ONE the SP dropped like a stone as a result of over reaction
>>>> Two, ALPH have a strategy of high borrowings to deliver high yield to its shareholders.
>>>> All Commercial REITs borrow to invest in properties so ALPH is no different in such practice
>>>> ALPH has a bank borrowings of 193.99 Mill GBP Vs an asset value of 245 Mill GBP
>>>> Due to the high debt ratio they are paying out as finance costs 7.26 mill
>>>> However that is not a major cost of concern since
>>>> (A) their rental service income is 23 mill GBP per Annum
>>>> (B) they have more than 87% occupancy
>>>> (c) They have more than 83 % of revenue from Grade "A" long term Tenants
>>>> (D) Their long term loans are at a fixed 5.26% interest rated borrowings
>>>> It appears that ALPH's sudden drop of their Share price by almost 66.60% is skewing the FFO Yield number
>>>> Once the over correction is reversed the FFO yield would be comparable to the other Commercial REIT levels