European Residential Real Estate Investment Trust (TSX: ERE.Un ) is an unincorporated, open-ended real estate investment trust. The company is Canada's first European-focused multi-residential real estate investment trust, with a current initial focus on investing in high-quality multi-residential real estate properties in the Netherlands.

Key Highlights:

• Steady Financials: In Q1FY22, the group posted its revenue of EUR 21.2 million, higher than EUR 18.8 million in pcp, supported by a steady growth in rental income. The company’s net loss stood lower at EUR 31.7 million in Q1FY22, as compared to EUR 35.6 million in pcp. This was supported by improved stabilized occupied Average Monthly Rent (AMR), which improved 3.8% on y-o-y to EUR 935.

• Update on Occupancy rate: In Q1FY22, the company reported a 98.6% occupancy in the residential property segment, which is slightly higher than 98.3% in pcp. On the other hand, occupancy rate in the commercial properties stood 99% in Q1FY22, as compared to 100% in pcp.

• Acquisition Update: In Q1FY22, the company reported two acquisitions in the Netherlands region at a purchase price of EUR 62.4 million, excluding transaction costs and fees. This represents an addition of aggregate 246 residential suites to the company’s portfolio that increased its suite count by 4%.

Stock Recommendation:

In Q1FY22, the company showcased an improved financial metrics, supported by strong rental growth which is a key positive. The company’s net asset value (NAV) stood higher at EUR 4.31 per share in Q1FY22, which is higher than EUR 3.27 per share in pcp.  On the flipside, the company’s reported a net loss in the quarter, due to higher loss from the change in fair value of Class B LP units (EUR 65.7 million v/s EUR 37.2 million in pcp). The company’s liquidity stood at EUR 43.5 million, significantly lower than EUR 100.6 million in pcp, which might hinder ongoing capital investments. Moreover, the stock of ERE.Un is available at an EV to Sales multiples of 13.9x on an TTM basis, as compared to the industry (Residential & Commercial REITs) median of 10.8x. Hence, considering the aforesaid facts, stretched valuation, we give a ‘Watch’ stance on the stock of ERE.Un at the last closing price of CAD 4.81 on May 02, 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

One-Year Technical Price Chart (as on May 02, 2022). Source: REFINITIV, Analysis by Kalkine Group

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Technical Analysis Summary

Disclaimer

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