Berenberg praises RDI REIT's strong balance sheet, upgrades to 'buy'

Analysts at Berenberg upgraded real estate investment trust RDI from 'hold' to 'buy' on Wednesday, stating the group's balance sheet would help it withstand headwinds stemming from the Covid-19 pandemic.

Berenberg said Covid-19 would, in its view, have a "significant impact" on RDI's operations but pointed out that the company's £85m-worth of cash on hand and the proceeds from its sale of the Bahnhof Altona Center in Hamburg were due imminently.

"We do not, therefore, anticipate a liquidity crunch," stated the analysts.

The German bank noted that while RDI was likely to delay non-core asset sales and rebase the dividend, it still expects portfolio loan-to-value ratio to fall within the 30-40% range that it targets by August 2021.

"We also continue to expect the portfolio weighting of UK retail to fall to 15% by FY 2023," noted Berenberg.

The analysts also said RDI's current valuation, a 68% discount to its last-reported net asset value, significantly undervalued the income-generating prospects of its "high quality portfolio".

Finally, despite shares being down 58% year-to-date, Berenberg said its price target remained unchanged at 80p.