Emira Property Fund | Short Amazon

Emira Property Fund (EMI) delivered adjusted DPS growth of +0.8% y/y and adjusted NAV growth of +0.5% y/y during HY'19. The direct portfolio's net property income grew +3.8% y/y during the period, as negative reversions and increases in property expenses offset contractual escalations. EMI acquired a 34.9% stake in residential REIT, Transcend in order to diversify the fund's exposure away from the domestic office and retail sectors. The fund has also continued its expansion into the USA retail power centre market during HY'19. However, we do not find evidence that the US assets have been acquired at abnormally high capitalisation rates. We believe that it is prudent to incorporate no like-for-like growth in the US portfolio over our three-year forecast, until a record of organic growth is established.

Given current listed property market conditions, we retain a relative UNDERPERFORM rating on EMI at an estimated forward dividend yield of 11.3% and a -21% discount to NAV.