Regional REIT

LN: RGL

£460.9m market cap

106.8p 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 has exchanged contracts for the £27.7m acquisition of a four-property regional office portfolio at a net initial yield (NIY) of 8.7%, its second significant transaction since H119 and marking progress with deployment of £62.5m (gross) proceeds of the July capital raise. In August it acquired a six-property regional office portfolio for £25.9m at a NIY of 8.9%, recycling capital released from the earlier sale of properties where asset management plans are mature. We expect both acquisitions to be accretive to earnings. H119 saw RGL report solid earnings and continuing strong income generation, supporting its target of declaring aggregate quarterly DPS of 8.25p (+2.5%) for FY19. We forecast further DPS growth in FY20, fully covered by adjusted earnings. This assumes further investment of c £33m by early 2020, funded by cash resources and modest further debt drawing with LTV remaining just below RGL’s c 40% target (39.9% at H119).

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 12.4 N/A
2018A 54.4 36.8 28.5 7.5 14.2 N/A
2019E 53.8 43.2 30.3 7.6 14.1 N/A
2020E 61.5 50.0 36.6 8.5 12.6 N/A
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. Rents and capital values in the retail sector have continued to weaken.

Last updated on 21/11/2019
Share price graph
Balance sheet
Forecast net debt (£m) 306.5
Forecast gearing ratio (%) 63
Price performance
%
1m
3m
12m
Actual 0.4 2.7 7.3
Relative* (0.6) 1.3 3.5
52-week high/low 109.6p/89.9p
*% 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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