On Thursday, Charter Hall Social Infrastructure REIT (CQE:AU) (OTC: FKKEF) stock received an upgrade from Canaccord Genuity from Hold to Buy, with a new price target set at AUD2.84, down from the previous AUD2.95.
This follows the company's publication of its fiscal year 2024 results, which met expectations, and the issuance of its fiscal year 2025 distribution guidance.
The distribution guidance for FY25 is forecasted to be 9% lower than what analysts at Canaccord Genuity had anticipated. The reason behind this adjustment is attributed to a hedging reset, which effectively advances debt costs. Despite the short-term impact, this move is seen as a positive for Charter Hall Social Infrastructure REIT's growth potential over the medium to long term.
The firm's assessment also points to the REIT's valuation now being more appealing based on a yield spread basis. Additionally, the ongoing recycling of portfolio assets is expected to contribute to a decrease in the discount of the company's shares to its net tangible assets (NTA).
At the end of FY24, the NTA per share stood at $3.82, which is 48% above the current share price. This significant difference has been a factor in the decision to upgrade the stock rating and adjust the price target. The new price target of AUD2.84, despite being lower than the previous target, reflects the firm's confidence in the REIT's prospects.
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