European Logistics And Data Centers Will Build Lasting Infrastructure

Key Takeaways

• Strategic focus on technology-driven logistics and data center assets, combined with sustainable portfolio enhancements, is set to leverage emerging demand and drive premium returns.
  
• Positive rental growth, selective reinvestment, and lower debt costs position the group for resilient earnings and enhanced capital efficiency amid evolving European market trends.
  
• Delayed income from new investments, rising borrowing costs, office sector headwinds, divestment risks, and development challenges could weigh on earnings and hamper future growth.

Catalysts

Stoneweg Europe Stapled Trust (“SERT”, formerly Cromwell European REIT and renamed as Stoneweg European REIT following the change in Sponsor) is a stapled group comprising Stoneweg European Real Estate Investment Trust and Stoneweg European Business Trust.

• The structural pivot towards logistics, light industrial, and notably data centers-supported by the recent AiOnX fund investment-positions the group to benefit from rising demand for technology-driven and e-commerce-related infrastructure, which is likely to boost revenue and enhance asset valuations over time.
  
• Robust rental growth trends (11.9% positive rent reversion, strong indexation, and under-rented portfolio) combined with ongoing urbanization in gateway European cities suggest continued occupancy resilience and upward pressure on rental income, supporting both current and future earnings.
  
• The company's heavy weighting towards sustainable, ESG-certified assets (84% of office portfolio BREEAM/LEED rated), active asset enhancement initiatives, and focus on green upgrades are well-aligned with increasing tenant and investor preference for environmentally responsible properties, driving premium rents and improved net margins.
  
• Ongoing active asset recycling and targeted reinvestment into high-yielding, supply-constrained development projects (e.g., Paris and Amsterdam) offer the potential for capital efficiency gains and higher return-on-equity, expected to accelerate earnings growth as market cycles turn.
  
• Lower debt costs are expected to persist or improve as the rate hike cycle in Europe abates and further ECB cuts are anticipated, easing interest expense pressures and supporting higher distributable income and net margins in coming years.

Stoneweg Europe Stapled Trust Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Stoneweg Europe Stapled Trust's revenue will grow by 1.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 24.9% today to 38.5% in 3 years time.
• Analysts expect earnings to reach €86.6 million (and earnings per share of €0.16) by about August 2028, up from €53.3 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as €70 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 14.9x on those 2028 earnings, down from 16.2x today. This future PE is lower than the current PE for the SG REITs industry at 16.1x.
• Analysts expect the number of shares outstanding to decline by 0.29% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.49%, as per the Simply Wall St company report.

Stoneweg Europe Stapled Trust Future Earnings Per Share Growth

Risks

• The new data center investment (AiOnX Fund) is currently not generating distributable income, and management indicated near
• to medium-term earnings from this segment will be reinvested rather than paid out; this delays DPU (distribution per unit) growth and could weigh on earnings and investor returns if value creation or future monetization disappoints.
  
• Rising borrowing costs, seen in the material increase in net interest expense due to refinancing older, low-rate bonds at higher rates, have already resulted in a 7% year-over-year decline in distribution per security (DPS); persistent high interest rates or limited further rate cuts may continue to pressure net margins and distributable income.
  
• Office sector exposures remain vulnerable: despite improvements, certain submarkets (like Finland) have low occupancy (down to 73%), requiring negative rent reversions to mitigate vacancy; this structural challenge in the European office asset class, especially in non-prime locations or amid ongoing hybrid work trends, could result in continued rental underperformance and impact revenue.
  
• The trust is relying on asset recycling-selling non-core or underperforming assets to fund growth opportunities and reduce gearing; if the timing of divestments and subsequent reinvestments is less favorable, there is risk of earnings dilution during transition periods, which may negatively affect both short-term and long-term financial performance.
  
• Portfolio growth, especially in development and enhancement projects, is increasingly tied to large capital expenditures and exposure to development risk; delays, regulatory hurdles (especially given Europe's stringent building and energy regulations), or cost overruns in key projects could reduce return on equity and slow NAV and earnings growth.

Valuation

• The analysts have a consensus price target of €1.874 for Stoneweg Europe Stapled Trust based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €224.7 million, earnings will come to €86.6 million, and it would be trading on a PE ratio of 14.9x, assuming you use a discount rate of 7.5%.
  
• Given the current share price of €1.54, the analyst price target of €1.87 is 17.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.