Regional REIT

LN: RGL

£395.2m market cap

106p last close

Regional REIT owns a highly diversified commercial property portfolio of predominantly offices and light industrial units located in the regional centres of the UK. It is actively managed and targets a total shareholder return of at least 10% with a strong focus on income.

Investment summary

RGL performed strongly in FY18, generating a 16.6% EPRA NAV total return, including 9% growth in EPRA NAV and a strong contribution from dividends, up c 3% in the year to 8.05p. Like for like valuations increased 4.5%, while significant transaction activity generated gains on disposals and refreshed the portfolio for further asset management-driven growth, with the average yield on disposals well below that on reinvestment. FY18 earnings growth and dividend cover were temporarily affected by the time lag to reinvestment and additional interest costs related to the issue of retail eligible bonds ahead of repayment of more expensive debt, but we expect the benefits to be seen in FY19. Our revised forecasts continue to look for FY19 earnings growth driven by reinvestment, continuing leasing progress, and a lower cost of debt, with an increased DPS fully covered. After reinvestment we expect LTV to remain in line with the c 40% targeted by management (FY18: 38.3%).

Y/E Dec
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (fd) (p)
P/E (x)
P/CF (x)
2017A 45.8 36.4 25.8 8.6 12.3 N/A
2018A 54.4 36.8 28.5 7.5 14.1 N/A
2019E 55.2 44.9 31.7 8.5 12.5 N/A
2020E 55.7 44.9 32.1 8.6 12.3 N/A
Last updated on 25/04/2019
Industry outlook

The supply demand balance for regional office and industrial property remains generally firm, and a positive yield spread between the regions and London offers potential for further narrowing. Parts of the retail sector are displaying clear signs of stress.

Last updated on 25/04/2019
Share price graph
Balance sheet
Forecast net debt (£m) 303.3
Forecast gearing ratio (%) 70
Price performance
%
1m
3m
12m
Actual 3.9 8.1 5.8
Relative* 0.0 (0.5) 5.4
52-week high/low 106.6p/90.1p
*% relative to local index
Key management
Kevin McGrath Chairman
Adam Dickinson Head of IR
Daniel Taylor Non Executive Director
Stephen Inglis Non Executive Director
Tim Bee Non Executive Director
William D. Eason Non Executive Director

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