Based on forward dividend yields, DBS' target price of 31 cents per unit suggests a yield of more than 7%

ESR REIT reported a 17% drop in its DPU for FY2024 as the REIT did not enjoy income from divested assets and as certain other properties are being redeveloped or down for asset enhancement initiatives.

However, analysts from DBS Group Research and RHB Bank Singapore remain optimistic on this REIT as they believe such portfolio rejuvenation efforts will bear fruit in the current FY2025.

As such, both Vijay Natarajan of RHB and Dale Lai and Derek Tan of DBS have maintained their respective "buy" calls on this counter as they believe the REIT is "bottoming out". 

For now, they have both trimmed their respective target prices to take into account equity fund-raising and lower income top-up assumptions.

Natarajan has trimmed his target price to 33 cents from 34 cents, while the duo from DBS now see ESR REIT worth 31 cents, down from 34 cents.

"With the bulk of ESR-REIT’s portfolio rebalancing strategy completed, we expect it to move into an organic growth phase and start reaping the benefits from an earlier pivot into higher quality and longer landlease assets," writes Natarajan in his Jan 27 note.

"Rent reversion is expected to moderate while funding costs should trend lower," he adds.

DBS' Lai and Tan favour ESR-REIT because it has a US$2 billion pipeline from its sponsor that can help drive growth even as other competing industrial REITs find it "increasingly challenging" to make accretive acquisitions.

Based on forward dividend yields, DBS' target price of 31 cents per unit suggests a yield of more than 7%. 

ESR REIT traded at 26 cents as at 3.21 pm, down 1.92%.