Summit Germany

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Summit Germany is a Guernsey incorporated investor in German commercial property. It holds a well-diversified portfolio acquired over the last decade, valued at €575m at the end of June 2014.

LATEST REPORTS

 
Trading update confirms portfolio strength
Published: Dec 18 2015

Summit Germany owns a well-diversified portfolio of commercial property located in Germany's main commercial centres. The portfolio generates steady rental cashflow, with potential for material growth in both revenues and capital values through active asset management.
The latest trading update confirmed robust portfolio performance this year and underpinned the outlook for FY16. The group's 103 assets, currently 87% occupied, generate €57m pa of net rent, with potentially another c €6m theoretically achievable if it were fully let.
The aggregate portfolio at the half-year was valued at €582.4m (8% rental yield). That has since increased to €718m, post recent acquisitions and the revaluation of the portfolio acquired in July.
This all provides strong support for our forecasts, and there remain plenty of opportunities within the portfolio for management to work assets to enhance rental income and capital values, via new lettings/reduced vacancies, conversion to residential use and development of surplus land.
Acquisitions this year have enhanced cash earnings and NAV, and the update confirmed that pipeline acquisitions should be similarly accretive. This supports our forecast increase in distributions, boosting an  already attractive yield on the shares.
 
H2 acquisitions underpin growth outlook
Published: Oct 02 2015

Summit Germany (SGL) owns a well-diversified commercial property portfolio, located in Germany's main commercial centres. Its strategy is to actively manage its assets to improve net rent and capital values, and grow portfolio scale through acquisition.
The recent interims confirmed the positive impact of actions taken to stabilise finances in 2014. Summit cut ongoing debt funding costs in half, maintained portfolio occupancy despite lease expiries, secured €6.3m rent from new leases/renewals and extended weighted average lease lengths to 4.1 years. That freed it to resume building its portfolio this year and two acquisitions post the mid-year committed another €95m. It has now invested the bulk of the cash raised in February's share issue, although it could release further funds by refinancing these assets. The acquisitions are excellent fits with the existing portfolio, add stable rental cash flows and help finance progressive dividend growth. 
The short term outlook, particularly opportunities for further acquisition based growth, is being influenced by competition amongst lenders, which has added to demand for German commercial property and pushed up prices. The group nonetheless still expects to identify suitable assets that fit a cautious approach, focused upon enhancing cash earnings. We still expect NAV/share growth by end FY15 in an improving portfolio and market, and, on our forecasts, the shares offer a prospective yield for the year ending December 2016 of 5.1%. 
 
Acquisitions to boost EPS from Q4
Published: Jul 13 2015

Summit Germany (SGL) owns a well-diversified commercial property portfolio, located in Germany's main commercial centres. Its strategy is to actively manage its assets to improve net rent and capital values, and grow portfolio scale through acquisition.
Indeed SGL recently reported two acquisitions that will potentially commit a significant proportion of the c €95m being held awaiting investment post February's €120m placing (at 70c/share). That cash currently earns only a negligible return on deposit, so completion of the two transactions should significantly enhance EPS and dividend cover, and may accelerate growth in distributions.
They agreed to buy a Stuttgart office park for €55m, with a 7.5% net initial yield, and comprises 63,000 sqm of lettable space (95% let, nine year weighted average unexpired lease), plus rights for 55,000 sqm. This portfolio  adds long term cash flow at an attractive yield, with material upside potential from future development.
Additionally there is a binding agreement on a loan facility to gain a Telecom portfolio. This debt is secured on a portfolio of six German commercial properties which it previously owned, over which it will regain full control. The portfolio consists of 63,000 sqm of aggregate net lettable space in German cities such as Dusseldorf, Heidelberg and Potsdam. The current 72% occupancy generates c. €5.5m pa aggregate net rent, a 13.8% rental yield on cost. 
For now, we hold our forecasts pending completion of the two acquisitions, probably towards the end of Q3 2015 and contributing to revenues from early Q4. It is difficult to be precise regarding the impact on profit and earnings until the deal structure is announced. However, the two combined will add a projected €9.6m pa to net rent vs an assumed near zero return on cash, providing potential for growth in both EPS and NAV per share.
 
2014 on target; set for acquisitive 2015
Published: May 05 2015

Summit Germany (SGL) owns a well-diversified commercial property portfolio, located in Germany's main commercial centres. Its strategy is to actively manage its assets to improve rent and capital values, and grow the scale of its portfolio through acquisition. 
The FY14 results confirmed impressive progress against all performance targets set for the first year post IPO. Phase one, restructuring, is now complete. The emphasis now switches firmly to portfolio growth. 
It currently has €95m of cash ready for EPS and cashflow enhancing acquisitions, and a €250m pipeline of potential purchases keeps its strategy on track.
Higher competition for German real estate has put pressure on rental yields, down by c 1% vs a year ago, but debt costs have fallen even further. 
Lower yields benefit valuations of the existing €583m portfolio and as SGL closes the deals it is tracking - which we assume will take 12-18 months - the outlook for NAV and dividend growth is very positive.
 
Well down the acquisition trail
Published: Apr 07 2015

Summit is a Guernsey incorporated investor with a large portfolio of commercial properties, mainly located in Germany's key commercial centres.
It has announced the completion of a previously reported €33m new facility with interest on the new debt charged at 1.96% pa, fixed for the seven year term. This is better than the 2.1% indicated and, more materially, significantly below the 9.5% pa coupon on its €24m outstanding shareholder loan, now fully repaid from issue proceeds.
Completion of the refinance at both lower interest rates and a reduced amortisation obligation will free up cash for new investment. Full repayment of the €50m shareholder loan generates c €4.75m pa in interest cost savings.
Post repayment, c. €90m is immediately available for investment to enlarge the portfolio. Summit has a substantial investment pipeline of German commercial property, reports negotiations at various stages and expects to release further updates soon. 
We shall amend  FY15 forecasts as additions to the portfolio are secured. For now we have adjusted the FY15e dividend to 3c/share due to the new shares and currently, minimal returns on the €90m of cash held on deposit pending investment. We anticipate steady growth in EPS as newly acquired properties help build net rental revenues, probably from H2 2015, with the full benefit in 2016.
 
Refinance unlocks cash for growth
Published: Jan 07 2015

Summit Germany is a Guernsey incorporated investor with a large portfolio of commercial properties, mainly located in the country's key commercial centres.
By completing refinance of its major debt in December on terms better than previously reported, SGL delivered a key catalyst for improved investment performance and valuation. Firepower can be further bolstered shortly by new debt which may be used to repay relatively high-cost borrowing ahead of schedule.
Trading has been above expectations in 2014. The year-end update confirmed that 173 new leases and renewals were signed last year and achieved on average 7% increases in rent per sq ft. Portfolio occupancy was 90% at end FY14
At 20% below FY15 NAV, and with potential for the dividend yield to move above 7% if current initiatives are secured, the shares look attractively priced.
 
Undeserved discount and growth to come
Published: Nov 17 2014

Summit Germany (SGL) is a Guernsey incorporated investor with a €575m portfolio of commercial properties, mainly located in the country's key commercial centres. Its assets are well diversified by sector and geography, and let to c. 560 tenants without any dependence on a single occupier. 
The group was admitted to AIM in February and raised €35m gross (€31m net) via a placing at 63c/share. It is now fully invested post the €46m acquisition in April of a €73.5m debt facility at a discount to face value. This generated a €28m valuation surplus and enabled it to regain control of a portfolio of 11 properties.
First half growth reflects an acquisition in April, new lettings and rent indexation. H114 pre-tax profit, of €43.4m includes a €28m valuation surplus (H113: €17.2m). NAV/share grew by 17% to 75c in H1 (EPRA NAV/share up 13% to 79c). 
NAV should benefit as from yield compression and rental growth, while SGL has a c €120m pipeline of potential acquisitions available on terms which, subject to securing new equity and debt, would further enhance net cashflow. We forecast 86.5c / share FY15 EPRA NAV, 28% above the current share price.

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