Elanor Retail Property Fund (ASX:ERF) is a AU$168.64M real estate investment trust (REIT), which is a collective vehicle for investing in real estate that began in the US and has since been adopted worldwide as an investment asset. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the Australian stock market as a whole. Today, I will analyse the industry outlook, as well as evaluate whether Elanor Retail Property Fund is lagging or leading in the industry. See our latest analysis for Elanor Retail Property Fund
What’s the catalyst for Elanor Retail Property Fund’s sector growth?
Concerns surrounding rate increases and treasury yield movements have made investors dubious around investing in REIT stocks. This is because REITs tend to be dependent on debt funding. They are also considered as bond investment alternatives due to their high and stable dividend payments. Over the past year, the industry saw growth in the teens, beating the Australian market growth of 7.09%. Elanor Retail Property Fund lags the pack with its negative growth rate of -84.60% over the past year, which indicates the company will be growing at a slower pace than its REIT peers. As the company trails the rest of the industry in terms of growth, Elanor Retail Property Fund may also be a cheaper stock relative to its peers.
Is Elanor Retail Property Fund and the sector relatively cheap?
The REIT sector’s PE is currently hovering around 7.23x, lower than the rest of the Australian stock market PE of 17.3x. This means the industry, on average, is relatively undervalued compared to the wider market – a potential mispricing opportunity here! Furthermore, the industry returned a higher 15.71% compared to the market’s 11.81%, making it a potentially attractive sector. On the stock-level, Elanor Retail Property Fund is trading at a higher PE ratio of 27.39x, making it more expensive than the average REIT stock. In terms of returns, Elanor Retail Property Fund generated 8.44% in the past year, which is 7.27% below the REIT sector.
Elanor Retail Property Fund has been a REIT industry laggard in the past year. In addition to this, the stock is trading at a PE above its peers, meaning it is more expensive on a relative earnings basis. If Elanor Retail Property Fund has been on your watchlist for a while, now may be the best time to enter into the stock. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the real estate sector. However, before you make a decision on the stock, I suggest you look at Elanor Retail Property Fund’s fundamentals in order to build a holistic investment thesis.
- 1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- 2. Historical Track Record: What has ERF’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Elanor Retail Property Fund? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.