Our opinion on the current state of SIRIUS(SRE)

Sirius Real Estate (SRE) is a notable player in the real estate investment trust (REIT) sector, with a significant presence on both the Johannesburg Stock Exchange (JSE) and the London Stock Exchange (LSE). Specializing in office, manufacturing, and warehousing properties in Germany, Sirius manages a portfolio of 141 assets valued at approximately 2 billion euros. This positioning has made it an effective rand-hedge, particularly as it benefited from the German economic recovery prior to the COVID-19 pandemic.

An essential development for Sirius has been its joint venture (JV) with AXA Investment Managers. Named "Titanium," the JV saw AXA taking a majority stake of 65%, leaving Sirius with a 35% share. This partnership enhanced Sirius's asset base significantly by acquiring five business parks from Sirius for 168 million euros, a transaction representing a 19% premium on their book value. This strategic move is set to potentially double Sirius's asset value within the next two years, illustrating a proactive approach to growth and investment return.

For the six-month period ending 30th September 2023, Sirius reported a 9.3% increase in funds from operations and a 7% increase in rent roll in Germany, alongside a 9% increase in the UK. The company also noted a loan-to-value (LTV) ratio of 40.8%, maintaining strong leverage metrics. Management highlighted the continued demand for its high-quality, affordable properties, which has supported consistent rental growth—projecting a tenth consecutive year of greater than 5% like-for-like rent roll increases.

More recent financial updates for the year ending 31st March 2024 reflect a rental roll increase of 8.2% and an impressive cash collection rate of 98%. These figures underscore the strength of Sirius’s operations and its effective management of assets. Additionally, the company reported substantial free cash reserves of approximately 220 million euros as of the end of March 2024, further highlighting its financial health.

From a technical analysis perspective, after a period of decline, Sirius's shares demonstrated a significant turnaround with a breakout on 17th November 2022 when the stock price rose from 1622c. This upward trajectory continued, with the share price reaching 2260c. This performance suggests a positive market sentiment and a strong outlook for the company, supported by an earnings multiple of 14.52, which ranks it among the highest-valued REITs on the JSE.

In a further display of its aggressive expansion strategy, on 7th April 2024, Sirius announced acquisitions in Germany and the UK worth over 100 million euros. These acquisitions are likely to contribute to the company's growth trajectory and reinforce its position as a robust investment, especially for those seeking exposure to real estate markets outside of South Africa. The ongoing success of Sirius reflects its strategic initiatives and operational efficiency, making it a compelling option for investors looking for growth and stability in the REIT sector.