We have upadred our forecasts for Elanor Commercial Property Fund (ASX: ECF) following the 1H24 results and management updates.
ECF delivers an attractive yield of 11.2% for FY24, based on management forecasts of 8.5cpu in distributions for FY24. Significant lease expiries in FY26 may have a significant impact on future distributions albeit dependent on management’s ability to renew leases and market conditions. Core Property has assumed a reduction in earnings in FY26 based on conservative ssumptions that 50% of FY26 leases will renew without downtime, with 12 months downtime assumed for the balance. We expect earnings to recover in FY27/28 as these expiries are re-leased.
Core Property has a BUY recommendation on ECF. We consider ECF provides an attractive value proposition with the potential for relatively high returns in comparison to the risks of the portfolio. ECF offers an attractive distribution yield of 12.2%, with an 85% payout ratio providing a strong buffer against earnings. We value ECF at $0.94 per unit based on a DCF valuation, with a 12-month roll forward value of $0.93 per unit.
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