Our opinion on the current state of SRE

Sirius (SRE) is a real estate investment trust (REIT), listed on the JSE and the London Stock Exchange (LSE), specializing in office, manufacturing, and warehousing properties in Germany. The company boasts ownership of 141 assets, valuing approximately 2bn euros. Evidently, Sirius represents a well-managed and expanding rand-hedge, which had been benefiting from the German economy's revival pre-COVID-19.

In an ambitious move, the company has entered a joint venture (JV) with AXA Investment Managers. According to the JV agreement, AXA will hold a 65% stake, whereas Sirius will retain 35%. Named "Titanium," the JV has already marked its inception by acquiring 5 business parks from Sirius at 168m euros, showcasing a 19% premium on their book value. This strategic partnership is poised to double Sirius's asset value within the ensuing two years.

For the semi-annual period ending on 30th September 2023, Sirius reported a noteworthy performance. The company's funds from operations witnessed a 9.3% increase, with the rent roll experiencing a growth of 7% in Germany and 9% in the UK. Such financial health is further evidenced by its loan-to-value (LTV) ratio standing at 40.8%.

The company's strategy and product quality have been pivotal, as reflected in their statement. Sirius highlighted the strong occupier demand for its high-quality, affordable offerings, which has been a cornerstone for rental growth. This dynamic positions the company on a trajectory to achieve its tenth consecutive year of over 5% like-for-like rent roll increases.

Despite these positives, the technical analysis of Sirius's share price indicated a downward trend, advising investors to observe for an upward breakout as a buy signal. This awaited breakout occurred on 17th November 2022, when the share price surged from 1622c to 2025c. Analysts remain optimistic about Sirius's continued upward trajectory.

Currently, Sirius is trading at an earnings multiple of 14.59, rendering it one of the most highly valued REITs on the JSE and a formidable rand hedge. While there is an expectation of its solid long-term investment potential, a cautionary stance is advised due to the possibility of further short-term declines.

On 7th April 2024, Sirius announced its latest strategic moves with acquisitions in Germany and the UK worth over 100m euros, signaling ongoing expansion and reinforcing its market position.