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  • Writer's pictureDaniel Lee

Should You Invest In Cromwell European REIT [Fundamental Analysis]

In this article, we'll be conducting a fundamental analysis of Cromwell European REIT and its suitability to achieve the following investment objective: To deliver a stable dividend yield of 5% to 6% per year while having a high degree of capital preservation ability.

Information Is Accurate Up To Jan 2024

Business Description

Cromwell European REIT is an Office and commercial REIT that was listed in 2018 and owns 113 properties across Europe. They are listed in Singapore with two separate denominations in EURO (CWBU) and SGD (CWCU)

What I Like About Cromwell REIT:

  • Distribution has been relatively stable (Fig 8)

  • Weighted Average Lease Expiry is well managed (Fig 12)

  • Management has a clear strategy, is pre-emptive and takes action to adjust the property portfolio to adapt to current trends. Currently, they are pivoting and diversifying away from office exposure into light industrial to manage the threats of WFH trends and take advantage of the onshoring trends. 

What I Do Not Like About Cromwell REIT:

  • The counter is very illiquid (Especially for the SGD counter).

  • Financial health has been deteriorating over the years (Fig 4 & 5), though the management has highlighted their intention to get it under control or at least ensure that it doesn’t deteriorate beyond a certain point (No more than 40% gearing).

  • FX Risk is very high – as expected – given that the REIT is 100% focused in Europe. Furthermore, I have a bias against the EURO zone given the economic maturity of the region coupled with unfavourable long-term demographic trends.

Updates From Recent Performance (3Q 2023)

General Comments:

  • Investors have been spooked by the negative EPS performance caused by the unrealized losses from property valuation. The fears of the property revaluation are probably exacerbated by the ongoing portfolio restructuring that the group is undergoing which has resulted in even higher uncertainty about how the unrealized losses would materialize in the future. 

Positive Headwinds:

  • The cost of debt is expected to remain stable for the next two years as Cromwell has no refinancing requirement until November 2023 of which, interest rates would have normalized by then near the range of the current average cost of borrowing.

Negative Headwinds:

  • Headwinds for the Eurozone area are relatively high as a result of economic weakness and political instability which may result in further downside in occupancy rate – especially for offices.

Download Full Report On Telegram

and continue reading my independent analyst report which will provide you with a detailed look at the fundamentals of the stock and a range of price targets to help you out with your investment decision for Cromwell European REIT:

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"Retire With REITS" eBook/Webinar

If you are new to REIT investing or would like to sharpen your investment knowledge, you can gain access to my webinar and download my e-book: "Retire With REITs" which will give you insights as to how I analyse and select the right REITs to invest in for passive income generation!

- Work In Progress -

Daniel is a Licensed Independent Financial Consultant with MAS and a Certified Financial Planner (CFP®).

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This article is meant to be the opinion of the author

This article is for information purposes only

This article should not be seen as financial advice

This advertisement has not been reviewed by the Monetary Authority of Singapore

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