Last checked at 
22 Sep 2022 07:00
Starwood European Real Estate Finance (SWEF)
22/09/2022
Results analysis from Kepler Trust Intelligence
Starwood European Real Estate Finance (SWEF) has delivered strong performance through a volatile economic environment, and paid two quarterly dividends in the half in line with its 5.5p target. These dividends were covered by net income (with some adjustments made for currency movements which are not expected to persist). They amount to an annualised yield of 5.6% on the share price at the time of writing.
Despite the strong performance, the discount widened over the period, moving from 8.8% to 11.4% as of 30/06/2022. The board has reinitiated a buyback programme since the period end, and this has helped bring the discount in to 4.2% at the time of writing.
In the event that the discount is 5% or wider in the six months to 31/12/2022, the board, "May put forward a realisation offer to Shareholders ('Realisation Offer'). The terms of such Realisation Offer would provide, broadly, that Shareholders may request for up to 75% of the Ordinary Shares in issue to be realised for cash. If this mechanism is not activated, the Directors shall exercise the discretion afforded to them under the Articles to put forward a realisation vote (as an ordinary resolution) ("Realisation Vote") to Shareholders by no later than 28 February 2023. The Board is actively investigating and considering the options available to them in the best interests of Shareholders. This process is ongoing and the outcome uncertain at the current time."
Kepler View
This is another set of strong results for Starwood European Real Estate Finance (SWEF). The loans have performed well and income has been boosted by rising base rates feeding through into the coupons received. Given market expectations of further rate rises to come, this should improve the income cover situation further and in due time, if sustained, maybe lead the board to consider an increased payout. We think the discount narrowing is likely to reflect the market recognising the uncertainty stemming from the pandemic is now in the past, as well as the active buyback programme. With the discount window now open for triggering a tender offer or continuation vote, this should provide strong support for the share price adding to the attractions of the shares in a troubled market…
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