ARF – Credit Suisse rates the stock as Neutral

Arena REIT’s announced asset revaluation gains resulted in a 7% ($72m) uplift relative to December 2020 book values, with the overall portfolio cap rate 33 bp lower to 5.80%.

The early learning centre (ELC) portfolio was up 6.8%, while the Healthcare portfolio was up 8.4%. Arena indicated revaluations will have a positive $0.21/share impact on net asset value (NAV), implying an estimated 30-June-2021 NAV of $2.53.

Arena announced its fourth quarter FY21 dividend per share (DPS) of 3.725¢, bringing the FY21 DPS of 14.8cps in line with previous guidance.

Based on current pricing, Credit Suisse notes Arena is trading at a 35% premium to NAV on a market implied cap rate of 4.51%.

While at face value this premium screens “high”, the broker believes the equities market is paying a premium for the company’s predictable earnings, strong balance sheet and favourable industry structure.

Neutral retained. Target is raised to $3.23 from $3.04.

Sector: Real Estate.

 

Target price is $3.23.Current Price is $3.41. Difference: ($0.18) – (brackets indicate current price is over target). If ARF meets the Credit Suisse target it will return approximately -6% (excluding dividends, fees and charges – negative figures indicate an expected loss).

 

 

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