RNY Property Trust (ASX:RNY): Is Now The Time To Buy Some Real Estate?
RNY Property Trust (ASX:RNY) is a AUDA$4.21M real estate investment trust (REIT), which is a collective vehicle for investing in real estate that originated in the US and has since been taken on board globally. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the Australian stock market as a whole. Today, I’ll take you through the real estate sector outlook, and also determine whether RNY is a laggard or leader relative to its real estate sector peers. View our latest analysis for RNY Property Trust
What’s the catalyst for RNY’s sector growth?
Concerns surrounding rate increases and treasury yield movements have made investors dubious around investing in REIT stocks. This is because REITs tend to be dependent on debt funding. They are also considered as bond investment alternatives due to their high and stable dividend payments. Over the past year, the industry saw growth in the teens, beating the Australian market growth of 5.37%. RNY lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means RNY may be trading cheaper than its peers.
Is RNY and the sector relatively cheap?
The REIT sector’s PE is currently hovering around 8x, lower than the rest of the Australian stock market PE of 17x. This means the industry, on average, is relatively undervalued compared to the wider market – a potential mispricing opportunity here! Furthermore, the industry returned a higher 15.74% compared to the market’s 11.92%, making it a potentially attractive sector. Since RNY’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge RNY’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? RNY recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto RNY as part of your portfolio. However, if you’re relatively concentrated in REIT, you may want to value RNY based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If RNY has been on your watchlist for a while, now may be the time to enter into the stock, if you like its ability to deliver growth and are not highly concentrated in the REIT industry. Before you make a decision on the stock, take a look at RNY’s cash flows and assess whether the stock is trading at a fair price.
For a deeper dive into RNY Property Trust’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other real estate stocks instead? Use our free playform to see my list of over 100 other real estate companies trading on the market.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
