London, UK, 21 March 2017

Edison issues update on Secure Income REIT (SIR)

Secure Income REIT's (SIR) FY16 results show income in line with expectations and 14.4% NAV growth per share. SIR has some of the longest leases in the sector, on either fixed or uncapped, upward-only RPI-linked rent reviews. Fixed debt and formulaic advisory costs lead to high predictability and lock in profits to support a rising and dependable dividend. Despite a material valuation gain, portfolio net initial yield was flat year-on-year as yield tightening on existing assets was offset by the acquisition of the Travelodge portfolio in October at a 7% yield. While the market appears to value SIR in line with long-lease peers on an earnings yield basis, the strong likelihood of NAV appreciation driven by rising rents may not be fully recognised. Our forecasts support the manager's expectation of 11% compounded annual NAV and dividend returns to 2021.

Secure income streams and predictable costs enable SIR to pay a dependable and growing dividend, with a current prospective yield of 4.0%. Stable rent growth should also translate into capital growth if valuation yields remain stable, as we assume. The shares trade at a c 5% premium to reported EPRA NAV, close to our FY17e EPRA NAV/share forecast and in line with peers on an earnings yield basis.

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