IREIT

IREIT: Barclays initiated coverage with Equal-Weight recommendation on the stock, in line with the Neutral view on the industry. DDM-derived TP is $0.93, with forward yield of ~6.5%. Main merits for investment include: 100% occupancy with WALE of 7.6 years to offer stable yields, and (ii) potential rental uplift as lease agreements provides for rent adjustment each time German CPI crosses 5%, 7% or 10%. However, near-term SGD DPU is more likely to decline in view of expected EUR depreciation. DPU-accretive third-party acquisitions are needed to lift DPU out of the base-case of -1.4%/-0.6% DPU contraction in FY15E/16E respectively. IREIT seems fairly priced as it currently trades in the mid-range of peers yield spreads over German 10-yr bunds, but are susceptible to key risks including (i)hedged exposure to EUR, with the house expecting 13% depreciating of EURSGD over next 12 months, (ii) tenant concentration risk, with 79% of NPI from Deutsche Telekom, (iii) uncertainty of rental growth, (iv) key shareholders risks, two major shareholders together own 76.4% stake, (v) interest rate risk. Among REITs, the house recommends exposure to Singapore office REITs for near-term cyclical upturn with CCT and KREIT as the top picks.