- Potential positive regulatory changes to childcare subsidies (i.e. increase in subsidies for childcare services from 28hours (or 3 days) to 4 days) and incentives for parents to work.
- Increasing macro trends of increased female labour participation rates as a key driver for ELC demand.
- Potential upside from its development pipeline in childcare centres.
- Solid balance sheet with low gearing.
- Strong and experienced management team.
- Strong tenant profile.
Key Risks
- Property portfolio fundamentals risks. Assets in the portfolio are subject to risks from deterioration in the property fundamentals such as cap rates, rents received from tenants and rental growth, expense risks, net asset values, occupancy rates, tenancy risk and costs, weighted average lease expiry. Deteriorating economic and demographic trends (such as lower population growth or lower GDP growth) will impact assets.
- Development risks. Poor execution or delays of development or redevelopment of existing properties may affect the rental income and value of assets of the Company.
- Adverse interest rate movements affect bond-proxy stocks. Deterioration in credit markets may result in changes to the availability of borrowings, impact gearing levels and debt covenants and the interest rates charged by lenders resulting in the Company borrowing at higher interest rates, thereby affecting distributions.
- Management performance risks. The Company relies on the expertise of managers to manage assets, asset recycling (acquisitions and divestments), and to execute the strategy.
FY21 Results Highlights
Statutory net profit $165.4m, up 116%. Net operating profit (distributable income) of $51.9m, up 18.5%. Earnings per security of 15.2 cents, up 4.5%. Distributions per security of 14.8 cents, up +6%. Total Assets of $1,151.5m, up +14%. Net Asset Value (NAV) per security of $2.56, up +15%. Gearing 19.9%, increased from 14.8% at FY20. 100% of contracted rent was collected in FY21. ARF guided to FY22 DPS guidance of 15.8 cents per security, which implies growth of +6.8% on FY21.
Company Description
Arena REIT (ARF) owns develops and manages a portfolio of childcare properties and healthcare facilities.
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.