If you stashed R1m in then little-known Sirius Real Estate when the Germany-focused business park owner listed on the JSE a decade ago, your investment would now be worth R5m.
That consists of R3m in share price gains and about R1m each from dividends and currency fluctuations.
Sirius’s hefty 400% total rand return for the 10 years to December 2024 — or 18% a year — places it streaks ahead of the listed property sector’s muted 34.6% 10-year return, or 3.1% a year over the same time
The company, which is also listed on the London Stock Exchange and was the first rand hedge counter to make use of the JSE’s fast-track listing process, has also comfortably outperformed sector heavyweight and perennial market darling Nepi Rockcastle. The Eastern Europe mall owner has delivered an average 12% annual total return (since 2019), Stanlib figures show.
As for Sirius’s South Africa-focused peers, there are only two counters that managed double-digit total returns over 10 years, according to SA Reit Association figures: retail-focused Fairvest (16.2% a year) and pure logistics play Equites Property Fund (11.5% a year).
But how much further upside does Sirius offer? The question is particularly relevant given the recent sell-down, which has seen the company’s share price slip 20% in the past six months.
CEO Andrew Coombs, who is visiting South Africa for Sirius’s 10-year listing anniversary, believes the stock was oversold in 2024 on the back of misplaced concerns about the company’s debt refinancing obligations.
Uncertainty about the direction of the German economy as the country heads for the polls on February 23 has probably also added to investor jitters.
Coombs tells the FM that last week’s five-times oversubscribed corporate bond issue, which raised €350m, should allay any lingering debt refinancing worries.
The proceeds of the bond, which matures in 2032 and carries a coupon of 4% — well below UK lending rates of about 6% — will be used mainly to repay the bulk of a €400m bond that matures in mid-2026.
Sirius has a further €200m in cash reserves on its balance sheet. “We have never had so much money sitting in the bank earning interest,” says Coombs. He plans to use some of the funds to further bulk up Sirius’s portfolio this year. Since late 2021, when Sirius entered the UK for the first time, the company has already added more than €500m worth of acquisitions to its portfolio, which has a book value of €2.35m, split 75/25 between Germany and the UK.
“We now have €350m of firepower to embark on a significant acquisition pipeline — without having to issue a single new share,” Coombs says.
That will no doubt be welcome news for shareholders after Sirius concluded two sizeable equity raises since November 2023 that have been earnings dilutive.
As far as Germany’s economic prospects are concerned, Coombs says the likely outcome of the forthcoming election is widely misunderstood. Fears of the country facing a downward spiral are unjustified, he believes.
“The most likely outcome of the election is a new coalition government that will create a more business-friendly climate, bring interest rates down and introduce policies that will support job growth and stimulate the economy.”
Still, Coombs is adopting a wait-and-see approach before he pushes the button on new deals. “It would be silly not to first see what happens in the election and whether new US president Donald Trump introduces any trade policies that could affect Germany.”
We have never had so much money sitting in the bank earning interest
— Andrew Coombs
But he’s confident that the first €100m pipeline of acquisitions, which are already allocated roughly 50/50 between the UK and Germany, will be concluded by end-March.
Another €100m of assets will likely be acquired by end-June, with a further €150m potentially deployed in the second half of 2025. That should push the loan-to-value to about 32%, still well below the company’s 35% threshold target.
“The next six months will be a very interesting and important period for Sirius and will supercharge our next growth phase,” says Coombs.
Meanwhile, now could be a good time for investors to stock up on Sirius. At this week’s level of about R18, the share is trading nearly 40% below its early-2022 peaks.
Even if it takes some time to get back to those levels, the company’s dividend proposition is a compelling enough reason to own Sirius shares.
Management’s policy is to pay a progressively higher dividend every year, come rain or shine, which has resulted in a 10-year uninterrupted growth track record. Sirius even raised its dividend during the pandemic, when others cut or suspended payouts.
The company’s rent roll was up 15.4% in 2020 and 8% in 2021, at a time when most other property stocks recorded a significant drop in revenues.
Coombs says because Sirius is not a real estate investment trust, it has more leeway to increase or decrease its dividend payout ratio when needed to meet dividend targets.
The payout ratio will in fact be increased from the usual 65% of distributable earnings to about 72% to bring the full dividend for the 12 months to end-March to €6.15, up from last year’s €6.05.
“But we’ll be back at 65% again as soon as we have executed on the acquisition pipeline,” says Coombs.
He adds: “We are now trading at a euro-base dividend yield of close to 7% and a 17% discount to NAV. That’s very cheap, given our earnings multiple of about 10.”
Analysts appear equally bullish. Adrian Jardine, senior analyst at Chronux Research, says Sirius has a highly rated management team that has consistently delivered on its earnings growth and progressive dividend targets even through multiple black swan events.
“The stock has performed phenomenally on the back of management’s obsessive focus to turn around underloved and undermanaged assets. Its ability to unlock value for shareholders through capital expenditure and rental growth initiatives is a key value proposition.”
Jardine adds that last week’s successful corporate bond issuance, coupled with management’s acquisition plans, means that growth prospects remain intact, despite short-term macroeconomic headwinds. “We believe it’s a good buy at the moment.”
Nicolas Lyle, senior portfolio manager at Stanlib, has a similar view. He refers to Sirius’s unrelenting focus on growing dividends as a key factor that differentiates it from its JSE-listed peers.
Lyle notes that the only other property stock with a 10-year uninterrupted dividend growth track record is UK-focused Primary Health Properties, which has been listed on the JSE for less than 18 months.
“Sirius looks ridiculously cheap. I believe there is a lot of upside left, especially from current share price levels,” he says.
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