Select Income REIT
by Zacks Equity ResearchJuly 16, 2012 | Comments : 0 Recommended this article: (0)
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Shares of Select Income REIT ( SIR - Snapshot Report ) are currently trading at an all-time high of $24.70, driven by an earnings surprise of 123.3% in the first quarter of 2012. This office REIT (real estate investment trust) presently retains a Zacks #1 Rank (Strong Buy). As its shares continue to move upwards, Select Income REIT promises to be a solid pick for investors seeking both growth and income.
Strong First Quarter
On May 2, Select Income REIT reported strong first quarter results with funds from operations (FFO) of $1.55 per share that surpassed the Zacks Consensus Estimate by a phenomenal 123.3%. Total revenues stood at $27.6 million, while total rentable square feet were 95.2% leased at quarter-end.
During the quarter, Select Income REIT sold 29.5% of its stock or 9.2 million shares in an initial public offering for $21.50 each, raising net proceeds of approximately $181.0 million. In addition, the company issued 22.0 million shares to CommonWealth REIT (CWH) in connection with its formation as a wholly-owned subsidiary of the latter.
Surge in Earnings Estimate Revisions
Over the past 60 days, the Zacks Consensus Estimate for 2012 increased 10.6% to $2.71. For 2013, the Zacks Consensus Estimate has increased 9.3% to $2.59 over the same period.
Reasonable Valuation Metrics
Select Income REITs valuation looks reasonable on a price-to-earnings (P/E) and price-to-book (P/B) basis. Shares of Select Income REIT are trading at a forward P/E of 9.12x, a 4.2% discount to the peer group average of 9.52x. On a P/B basis, the company is currently trading at 1.06x versus the peer group average of 0.93x.
Chart Resonates Growth Potential
Since June 14, 2012, Select Income REIT shares have fared relatively better than the simple moving average for 50 days or SMA (50). The continuous uptrend in stock prices, as mirrored in the following chart, offers an enticing upside potential going forward. Volume is fairly strong, averaging 154K daily. The year-to-date return for the stock is also noteworthy at 13.56% compared to an S&P 500 tally of (1.32%).
Based in Newton, Massachusetts, Select Income REIT owns office and industrial properties that are net leased to single tenants. The company was formed on December 19, 2011 as a wholly owned subsidiary of CommonWealth REIT. The company presently owns 251 properties spanning 21.4 million square feet in the U.S., the bulk of which are located in Hawaii. The company currently has a market cap of $770.64 million.
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