Our opinion on the current state of SRE

Sirius (SRE) is a real estate investment trust (REIT), listed on the JSE and the London Stock Exchange (LSE), which specialises in office, manufacturing, and warehousing properties in Germany. The company owns 141 assets with a book value of about 2bn euros. Obviously, this is a well-managed and growing rand-hedge which was benefiting directly from the recovery of the German economy before COVID-19. The company has formed a joint venture (JV) with AXA Investment Managers in terms of which AXA will own 65% and Sirius will own 35%. The JV (called "Titanium") acquired 5 business parks from Sirius for 168m euros - which is a 19% premium to their book value. The JV will allow Sirius to double the value of its assets over the next two years. In its results for the six months to 30th September 2023 the company reported funds from operations up 9,3% and a rent roll up 7% in Germany and 9% in the UK. The company has a loan-to-value (LTV) of 40,8%. The company said, "...occupier demand for our high quality affordable products underpinning rental growth and keeping us on track to deliver our tenth consecutive year of greater than 5% like-for-like rent roll increases". Technically the share has been falling and we recommended applying a trendline and waiting for a convincing upward break. That break came on 17th November 2022 at a price of 1622c and the share has so far moved up to 2025c. We expect it to continue to perform well. At current levels, it is on an earnings multiple of 15,02 - which makes it one of the most highly rated REIT's on the JSE. It is also, obviously, a great rand hedge. We expect that it will prove to be a solid long-term investment in the years to come, but right now we think it may still fall further.