The only UK-focused REIT listed on SGX, offering a counter-cyclical portfolio. Elite UK REIT is the only UK-focused REIT listed in Singapore. With its unique position in the REIT space, it functions as social infrastructure. As most of its rental income derived from leases with the AA-rated UK Government, its stable stream of cash flow is a key positive.

DPU back on a growth trajectory; forward yields of 9% attractive. We believe Elite’s DPU is back on a growth trajectory of a c.3.5% CAGR over FY25-27F. The brightening outlook is supported by income contribution from recent acquisitions, higher margins on occupancy improvement and higher interest savings, as well as an increase in distribution payout ratio to 95%. Our revised FY25F/26F DPU estimates are 3.04/3.12 pence after factoring in the recent acquisition, implying forward yields of 9% and offering compelling value to investors.

Repositioning the REIT could offer strategic medium-term upside. Elite has plans to repurpose several assets into purpose-built student accommodations (PBSA), which benefits from favourable supply-demand dynamics in the UK. Further value creation is underway at Peel Park, where a planning application for a data centre is in progress. Successful execution could drive a meaningful NAV uplift over the medium term, potentially catalysing share price.

Maintain BUY with higher TP of GBP0.40, as we roll forward valuations. Our TP is based on a DCF valuation with a WACC of 7.1% and terminal growth rate of 1.0%.

Key risks include: 1) main tenant DWP (which contributes 92% of gross rental income) not renewing leases in 2028 and 2) equity fundraising (if any) bringing gearing lower.