Q: Greetings 5i, your updated analysis please on PLD in terms of valuation, balance sheet strength and future growth. In your opinion would you add, hold or sell, assuming one wants exposure to the Industrial REIT sector? I also hold DIR.UN, have recently added to that position and intend to hold. Thank you.
5i Research Answer:
We think both are solid names in the industrial REIT sector.
PLD is trading at an EV/EBITDA of 22.0x, with a net debt/EBITDA of 5.4x. The company is expected to grow around 6%–8% over the next few years.
DIR.UN is trading at 16.3x EV/EBITDA and has a higher leverage profile, currently standing at 8.4x. The company is expected to grow its topline by around 8% over the next few years.
Overall, both are quite similar in terms of organic growth. DIR.UN has a slightly higher leverage level, but that’s not too concerning. For investors seeking exposure to industrial REITs, we are comfortable holding both. In addition, real estate assets may see a pick-up in valuation given the tailwind from declining interest rates.