Last close As at 13/08/2026
GBP0.98
▲ −0.30 (−0.31%)
Market capitalisation
GBP159m
Research: Real Estate
Regional REIT (RGL) has declared a Q421 DPS of 1.7p, taking the total for the year to 6.5p, which we forecast will be fully covered by EPRA earnings reported when the results to 31 December 2021 (FY21) are reported on 29 March. The attractive dividend yield of 7.4% is one of the highest in the UK REIT sector and RGL believes the office sector is poised for recovery.
Regional REIT |
FY21 DPS target met, confirming attractive yield |
Portfolio and dividend update |
Real estate |
24 February 2022 |
Share price performance
Business description
Next events
Analyst
Regional REIT is a research client of Edison Investment Research Limited |
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Regional REIT (RGL) has declared a Q421 DPS of 1.7p, taking the total for the year to 6.5p, which we forecast will be fully covered by EPRA earnings reported when the results to 31 December 2021 (FY21) are reported on 29 March. The attractive dividend yield of 7.4% is one of the highest in the UK REIT sector and RGL believes the office sector is poised for recovery.
Year end |
Net rental |
EPRA |
EPRA |
NAV/ share** (p) |
DPS |
P/NTA |
Yield |
12/19 |
55.0 |
31.0 |
7.8 |
112.6 |
8.25 |
0.78 |
9.4 |
12/20 |
53.3 |
27.9 |
6.5 |
98.6 |
6.40 |
0.89 |
7.3 |
12/21e |
56.3 |
30.3 |
6.6 |
96.9 |
6.50 |
0.91 |
7.4 |
12/22e |
64.0 |
35.1 |
6.8 |
98.0 |
6.70 |
0.90 |
7.6 |
Note: *EPRA earnings exclude revaluation movements, gains/losses on disposal and other non-recurring items. EPRA EPS is fully diluted. **NAV used is EPRA net tangible assets (NTA) per share. EPS and NTA are fully diluted.
Strong rent collection and valuation growth
The FY21 DPS of 6.5p (FY20: 6.40p) is in line with RGL’s target. The Q4 DPS will be paid as a property income distribution on 8 April 2022. Dividends are supported by continuing strong rent collection. Thus far, the FY21 rent collection rate is 98.6% compared 97.7% at this time last year. FY21 collection comprises 97.31% ‘cash collected’, monthly rents of 0.4% and agreed collection plans of 1.0%. Driven primarily by acquisitions (net of disposals), the portfolio value increased strongly to £906.1m in FY21 (FY20: £732.4m) but growth also included like-for-like valuation gains of 1.1% (with H2 building on H121 gains of 0.4%). This implies there may be upside potential to our FY21 NAV forecast. Acquisitions included a significant and complementary portfolio of predominantly regional office assets for £236m in Q321, reflecting a net initial yield of 7.8% and reversionary yield of 11.0%, providing attractive immediate income with good growth opportunities.
RGL believes office sector is poised for recovery
RGL believes the office is an essential aspect of the working infrastructure and the sector is poised for recovery, particularly for good quality regional assets with affordable rents. This is now the focus of investment following significant transaction activity during FY21, rotating the portfolio further towards offices (now c 90% by value) where it identified a mispricing and taking advantage of investor enthusiasm for industrial assets (now reduced to c 5%). Reflecting strong asset management potential, the portfolio acquisition contributed to a reduction in EPRA occupancy at end-FY21 (81.8% vs 85.7% at H1), as did a well-flagged large lease expiry towards the year-end. During FY21 gross rent roll increased substantially with portfolio growth to £72.1m (FY20: £64.2m), with strong upside potential towards an ERV of £94.6m.
Valuation: High yield and fully covered DPS
RGL continues to offer one of the highest yields in the UK REIT sector. Its FY21 yield of 7.4% is significantly above close peers. Although smaller than the peer average, its discount to our forecast FY21 NAV is 9%.
Exhibit 1: Financial summary
Year end 31 December (£m) |
2018 |
2019 |
2020 |
2021e |
2022e |
2023e |
INCOME STATEMENT |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
Rental & other income |
62.1 |
64.4 |
62.1 |
66.0 |
77.0 |
78.1 |
Non-recoverable property costs |
(7.7) |
(9.4) |
(8.8) |
(9.7) |
(13.0) |
(12.2) |
Net rental & related income |
54.4 |
55.0 |
53.3 |
56.3 |
64.0 |
65.9 |
Administrative expenses (excluding performance fees) |
(10.5) |
(10.9) |
(11.3) |
(11.3) |
(12.3) |
(12.4) |
Performance fees |
(7.0) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
EBITDA |
36.8 |
44.1 |
42.0 |
45.0 |
51.7 |
53.5 |
EPRA cost ratio |
40.1% |
31.6% |
32.4% |
28.8% |
32.9% |
31.5% |
EPRA cost ratio excluding performance fee |
28.6% |
31.6% |
32.4% |
28.8% |
32.9% |
31.5% |
Gain on disposal of investment properties |
23.1 |
1.7 |
(1.1) |
2.1 |
0.0 |
0.0 |
Change in fair value of investment properties |
23.9 |
(3.5) |
(54.8) |
(12.6) |
4.6 |
9.3 |
Change in fair value of right to use asset |
(0.2) |
(0.2) |
(0.2) |
(0.2) |
(0.2) |
|
Operating Profit (before amort. and except.) |
83.8 |
42.0 |
(14.1) |
34.3 |
56.1 |
62.6 |
Net finance expense |
(15.7) |
(13.7) |
(14.0) |
(14.5) |
(16.4) |
(16.4) |
Fair value movement in interest rate derivatives & goodwill impairment |
(0.1) |
(2.0) |
(3.1) |
2.6 |
0.0 |
0.0 |
Profit Before Tax |
67.9 |
26.3 |
(31.2) |
22.4 |
39.7 |
46.2 |
Tax |
(0.6) |
0.3 |
0.2 |
0.0 |
0.0 |
0.0 |
Profit After Tax (FRS 3) |
67.4 |
26.5 |
(31.0) |
22.4 |
39.7 |
46.2 |
Adjusted for the following: |
||||||
Net gain/(loss) on revaluation/disposal of investment properties |
(47.0) |
1.9 |
55.9 |
10.5 |
(4.6) |
(9.3) |
Other EPRA adjustments |
0.5 |
2.6 |
3.0 |
(2.6) |
0.0 |
0.0 |
EPRA earnings |
20.9 |
31.0 |
27.9 |
30.3 |
35.1 |
36.9 |
Performance fees |
7.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Adjusted earnings |
27.9 |
31.0 |
27.9 |
30.3 |
35.1 |
36.9 |
Period end number of shares (m) |
372.8 |
431.5 |
431.5 |
515.7 |
515.7 |
515.7 |
Fully diluted average number of shares outstanding (m) |
372.8 |
398.9 |
431.5 |
457.1 |
515.7 |
515.7 |
IFRS EPS - fully diluted (p) |
18.1 |
6.6 |
(7.2) |
4.9 |
7.7 |
9.0 |
EPRA EPS, fully diluted (p) |
5.6 |
7.8 |
6.5 |
6.6 |
6.8 |
7.2 |
Adjusted EPS (p) |
7.5 |
7.8 |
6.5 |
6.6 |
6.8 |
7.2 |
Dividend per share (p) |
8.05 |
8.25 |
6.40 |
6.50 |
6.70 |
7.10 |
Dividend cover |
93.1% |
94.2% |
101.0% |
101.9% |
101.5% |
100.8% |
BALANCE SHEET |
||||||
Non-current assets |
720.9 |
806.0 |
749.5 |
927.2 |
943.6 |
964.7 |
Investment properties |
718.4 |
787.9 |
732.4 |
910.4 |
927.0 |
948.3 |
Other non-current assets |
2.5 |
18.1 |
17.2 |
16.8 |
16.6 |
16.4 |
Current Assets |
127.0 |
69.4 |
101.1 |
80.9 |
74.6 |
65.6 |
Other current assets |
22.2 |
32.2 |
33.7 |
28.9 |
29.2 |
29.8 |
Cash and equivalents |
104.8 |
37.2 |
67.4 |
51.9 |
45.5 |
35.9 |
Current Liabilities |
(83.7) |
(36.2) |
(49.1) |
(56.2) |
(60.8) |
(62.2) |
Borrowings |
(0.4) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Other current liabilities |
(83.3) |
(36.2) |
(49.1) |
(56.2) |
(60.8) |
(62.2) |
Non-current liabilities |
(334.7) |
(355.5) |
(380.9) |
(454.4) |
(454.6) |
(454.9) |
Borrowings |
(285.2) |
(287.9) |
(310.7) |
(386.9) |
(387.6) |
(388.4) |
Other non-current liabilities |
(49.5) |
(67.6) |
(70.3) |
(67.4) |
(67.0) |
(66.5) |
Net Assets |
429.5 |
483.7 |
420.6 |
497.5 |
502.8 |
513.3 |
Derivative interest rate swaps & deferred tax liability |
1.0 |
2.6 |
5.0 |
2.5 |
2.5 |
2.5 |
Goodwill |
(1.1) |
(0.6) |
0.0 |
0.0 |
0.0 |
0.0 |
EPRA net tangible assets |
429.4 |
485.7 |
425.6 |
499.9 |
505.3 |
515.8 |
IFRS NAV per share (p) |
115.2 |
112.1 |
97.5 |
96.5 |
97.5 |
99.5 |
Fully diluted EPRA NTA per share (p) |
115.2 |
112.6 |
98.6 |
96.9 |
98.0 |
100.0 |
CASH FLOW |
||||||
Cash (used in)/generated from operations |
38.8 |
26.0 |
48.0 |
56.5 |
56.0 |
54.3 |
Net finance expense |
(11.9) |
(12.2) |
(12.5) |
(13.2) |
(15.4) |
(15.4) |
Tax paid |
(1.5) |
(0.8) |
0.2 |
0.0 |
0.0 |
0.0 |
Net cash flow from operations |
25.4 |
13.0 |
35.7 |
43.4 |
40.7 |
38.9 |
Net investment in investment properties |
100.6 |
(25.6) |
(0.3) |
(188.5) |
(12.0) |
(12.0) |
Acquisition of subsidiaries, net of cash acquired |
(32.6) |
(43.9) |
0.0 |
0.0 |
0.0 |
0.0 |
Other investing activity |
0.2 |
0.2 |
0.1 |
0.0 |
0.0 |
0.0 |
Net cash flow from investing activities |
68.2 |
(69.4) |
(0.2) |
(188.5) |
(12.0) |
(12.0) |
Equity dividends paid |
(29.4) |
(32.5) |
(26.7) |
(28.1) |
(34.3) |
(35.7) |
Debt drawn/(repaid) - inc bonds and ZDP |
(50.5) |
3.5 |
22.2 |
75.7 |
0.0 |
0.0 |
Net equity issuance |
(1.2) |
60.5 |
0.0 |
83.1 |
0.0 |
0.0 |
Other financing activity |
47.7 |
(42.7) |
(0.8) |
(1.0) |
(0.8) |
(0.8) |
Net cash flow from financing activity |
(33.4) |
(11.2) |
(5.3) |
129.7 |
(35.1) |
(36.5) |
Net Cash Flow |
60.2 |
(67.6) |
30.1 |
(15.5) |
(6.4) |
(9.6) |
Opening cash |
44.6 |
104.8 |
37.2 |
67.4 |
51.9 |
45.5 |
Closing cash |
104.8 |
37.2 |
67.4 |
51.9 |
45.5 |
35.9 |
Balance sheet debt |
(374.6) |
(337.1) |
(360.1) |
(436.5) |
(437.4) |
(438.3) |
Unamortised debt costs |
(5.8) |
(6.9) |
(6.0) |
(5.4) |
(4.5) |
(3.6) |
Closing net debt |
(275.5) |
(306.8) |
(298.8) |
(390.0) |
(396.4) |
(406.0) |
LTV |
38.3% |
38.9% |
40.8% |
42.8% |
42.8% |
42.8% |
Source: Company data, Edison Investment Research
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