The Sirius in the JSE

Sirius, a bright star in the stock market?

Uncertainties in the global economy have continued to create chaos for some companies. However this didn't stop Sirius Real Estate Limited from representing the definition of a Sirius in the stock market.

What is a Sirius?

Defined as the brightest star in the night sky; for investors, a bright stock in the stock market may be something worth keeping on ones' radar due to its potential for robust growth, expansion and dividend payouts.

The pandemic has taken a toll on many stocks, especially REITs, which have seen their market values plummet exponentially. This came after nations globally started imposing restrictions on movement.

Sirius REIT Limited, a JSE listed company, is among the REITs that strongly recovered from the impact of Covid 19.

Login to view Sirius Real Estate Limited (SRE) shares

on EasyEquities

Sirius Real Estate Limited (SRE)

Sirius has shown resilience against the global economic turmoil. Though there was a decline in queries for property letting, the pandemic created a conducive environment for Sirius's Storage business, which makes up 35% of the company's portfolio.

Like many others, Sirius saw the restriction announcements wipe out more than half of its share price to the 2018 range of R10 per share; but it wasn't long after the company recouped its market value, further surging to its all-time high of R27, as of writing.

Acquisitions

Committed to expanding its portfolio, Sirius has made progress in its acquisitions and deals since the beginning of the 2020 calendar year (CY20) to create better value for investors.

The company started the year on a positive note with its acquisitions of Neus II and The Neuruppin property.

According to Sirius, the Neus II acquisition "offers a good opportunity to add significant value by playing to the strengths of our integrated business model and track record of maximising occupation and growing rental levels." The Neuruppin property deal opens up "potential plans to expand in the Berlin and Hamburg area", an area expected to benefit from the road infrastructure anticipated to be completed in 2022.

"As well as the further opportunity to develop vacant parcels of land within the site", the company added. As of the second quarter of 2020, Sirius completed seven acquisitions, including those mentioned above, valued at €119,98 million including costs.

Moving into 2021, the company completed three more acquisitions valued at €26 million. Commenting on the acquisitions, Sirius CEO, Andrew Coombs added that: "Our acquisitions at Mannheim, Norderstedt and Nuremberg see us drawing on Sirius's on the ground knowledge of local markets to acquire assets at attractive yields offering a combination of secure income and value-add potential."

More acquisitions followed during the period.

Login to view Sirius Real Estate Limited (SRE) shares

on EasyEquities

Adding to the line of acquisitions, the company proposed and completed another acquisition of BizSpace group, which will include a capital raise introducing an additional 105 million shares to the market - this enables Sirius to raise £137 million.

The company also secured another €400 million through a bond issue in June 2021, which will also be in line to support the company's plans in acquisitions and expansion opportunities.

Financials and Dividends Payouts

According to the company's financials for the six month period, which ended on 30 September 2021, Sirius' profits increased to €78.2 million vs €62.2 million during the previous comparative period (PCP). The company achieved a 13% in funds from operations, which enabled the board to declare a dividend of 2.04c per share for the period - the last trading date being 13 December 2021. The payout represented a 12% increase from 1.82c per share during the first half of 2020 (H1 2020).

Further reflecting a strong balance sheet and valuation growth, Sirius' like-for-like valuation increased to €1.4 billion within the period, representing a 4.6% growth in six months - which according to the company, the "like-for-like comparison assesses assets that were in the portfolio previously and excludes acquisitions and disposals."

Sirius's cash balance was sitting at €187.6 million, with €172.7 million unrestricted, which provides capacity for more acquisitions and investments.

Commenting on the company’s outlook, Andrew added that, "Sirius is well-positioned to capitalise on the wider macro trends being felt in the market, with increased nearshoring and the localisation of supply chains driving demand for space within our asset class.

"We have made strong progress throughout the first half and … we remain well placed to continue to perform in the second half of the financial year and beyond."

Login to view Sirius Real Estate Limited (SRE) shares

on EasyEquities

Informed decision

With the company making provisions to expand, let's also keep in mind that measures such as the issue of shares may be dilutive for a short period.

In addition, this may result in long term gains as earnings from new acquisitions consolidate into the holding company.

New to investing

and want to know more about our other stock picks?

Read: Capital in transit for long term gains?

Sources – EasyResearch, JSE Sens, Sirius Real Estate Limited.

Follow Cay-Low Mbedzi

@caylow_SA