Edison issues update on Secure Income REIT (SIR)

London, UK, 21 March 2017

Edison issues update on Secure Income REIT (SIR)

Secure Income REIT's (SIR) FY16 results show income in line with expectations and 14.4% NAV growth per share. SIR has some of the longest leases in the sector, on either fixed or uncapped, upward-only RPI-linked rent reviews. Fixed debt and formulaic advisory costs lead to high predictability and lock in profits to support a rising and dependable dividend. Despite a material valuation gain, portfolio net initial yield was flat year-on-year as yield tightening on existing assets was offset by the acquisition of the Travelodge portfolio in October at a 7% yield. While the market appears to value SIR in line with long-lease peers on an earnings yield basis, the strong likelihood of NAV appreciation driven by rising rents may not be fully recognised. Our forecasts support the manager's expectation of 11% compounded annual NAV and dividend returns to 2021.

Secure income streams and predictable costs enable SIR to pay a dependable and growing dividend, with a current prospective yield of 4.0%. Stable rent growth should also translate into capital growth if valuation yields remain stable, as we assume. The shares trade at a c 5% premium to reported EPRA NAV, close to our FY17e EPRA NAV/share forecast and in line with peers on an earnings yield basis.Click here to view the full report.

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