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RNS Number : 8387P Schroder Eur Real Est Inv Trust PLC 04 July 2025
Schroder European Real Estate (SERE)
04/07/2025
Results analysis from Kepler Trust Intelligence
Over the six months to 31/03/2025, Schroder European Real Estate (SERE)
produced an NAV total return of 0.3% (2024: -1.3%). The NAV per share fell
marginally to 120.1c (30/09/2024: 122.7c), with the main offsetting
factors being earnings of 2.8c per share and a positive contribution to NAV
from SERE's share buyback programme of 0.3c per share.
SERE currently yields c. 7.3%. and dividends of 2.96c were paid during the
period. Dividends were 100% covered by EPRA earnings. EPRA earnings were flat
at €3.9m compared to the previous six months.
The net initial yield on Schroder European Real Estate's (SERE) portfolio
remained static at 7.0% over the last year, and the dividend yield at the
share price is c. 7.3%, both of which are significant premia to interest rates
and government borrowing costs in Europe. This, at a time where many larger
REITs are seeing their dividend yields closing the gap with government bond
yields, highlights that SERE remains significantly undervalued. On one hand,
SERE is a small cap REIT, with a market cap of c. £90m, and small cap
equities across the UK, Europe and elsewhere have all had a tough time
attracting investor attention. On the other hand, SERE has a strong balance
sheet and has had good success in asset management initiatives, the assets are
institutional-grade and, as the valuation summary and the disposal outlined
above shows, valuations are stable to rising, or there are asset management
initiatives in play to redress declines. Balancing that, the portfolio has a
relatively short weighted average lease length of 3 years (to break) and is
slightly over-rented with an ERV of €15.6m against the current rental income
of €16.3m. But shorter lease lengths are part of active asset management and
the c. 35% discount when German 10-year bonds are yielding just over 2.5%
seems like an excessively negative appraisal of the risks.
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