What this leading broker is saying about the Dexus (ASX:DXS) share price

One broker has delivered its analysis of Dexus shares after the company’s recent acquisitions. Here are the details…

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The Dexus (ASX: DXS) share price has fallen into the red today, slipping 1.22% lower than yesterday’s closing price.

At the time of writing, the REIT is trading for $10.66 a share.

That’s slightly ahead of the ASX200 A-REIT index (XPJ) which has dropped 1.45% in early trading.

Let’s investigate further.

Why has the Dexus share price been climbing lately?

The Dexus share price has been on the move lately since the company announced the acquisition of a $1.5 billion industrial property portfolio.

Dexus has managed to get its hands on the Jandakot Airport in Perth, a fund-through development in NSW and a Victorian logistics facility that’s leased to Aus Post.

It’s raising $350 million by issuing additional equity at $3.45 per share to finance the deal taking place with APN Industria REIT (ASX: ADI).

According to the company, its moves to purchase the portfolio form part of its agenda to invest in more sustainable areas to generate revenue.

What are analyst’s saying about Dexus shares?

One leading broker believes Dexus’s strategy to diversify away from offices could potentially lead to headwinds for the company further down the line.

Investment bank Citibank has some concerns over the company’s business and revenue model.

It notes that aside from this acquisition, since the pandemic, Dexus has also sold off $1.6 billion in office assets and is trying to sell another $1.3 billion – a total of $2.9 billion in potential disposals.

Yet, despite Dexus’s “recent reweighting, office rent contributes a majority of the income for Dexus, where we see structural headwinds”, according to Citi.

Basically, if Dexus sells a bunch of its offices, Citi is struggling to see where its revenue growth comes from moving into the future as Dexus earns most of its income from office rent.

Plus, with Dexus’s shift, there are risks it might not pan out, given the property giant is entering unknown territory.

There’s just too much uncertainty for Citi’s liking, especially given Dexus is shifting away from its bread and butter.

Consequently, it has a sell rating on Dexus shares and believes there may be more challenges for the company moving forward.

Dexus share price snapshot

The Dexus share price has climbed around 15% this year to date and gained just over 18% in the past 12 months.

Hit hard by the pandemic, Dexus shares have lagged the S&P/ASX 200 Index (ASX: XJO)’s return of around 25% over this time.

Should you invest $1,000 in Dexus right now?

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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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