ESR-REIT's (SGX:J91U) About To Shift From Loss To Profit

With the business potentially at an important milestone, we thought we'd take a closer look at ESR-REIT's (SGX:J91U) future prospects. ESR-REIT has been listed on the Singapore Exchange Securities Trading Limited since 25 July 2006. With the latest financial year loss of S$820k and a trailing-twelve-month loss of S$78m, the S$1.4b market-cap company amplified its loss by moving further away from its breakeven target. Many investors are wondering about the rate at which ESR-REIT will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

Check out our latest analysis for ESR-REIT

According to the 5 industry analysts covering ESR-REIT, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2019, before generating positive profits of S$43m in 2020. So, the company is predicted to breakeven approximately 12 months from now or less. We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 67% is expected, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Underlying developments driving ESR-REIT's growth isn’t the focus of this broad overview, but, take into account that typically a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing we would like to bring into light with ESR-REIT is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in ESR-REIT's case is 75%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of ESR-REIT to cover in one brief article, but the key fundamentals for the company can all be found in one place – ESR-REIT's company page on Simply Wall St. We've also compiled a list of important aspects you should further examine:

1. Valuation: What is ESR-REIT worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether ESR-REIT is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on ESR-REIT’s board and the CEO’s background.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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