Investment Thesis

• WPR currently trades at a discount to its NTA and the valuations 
•  Solid distribution yield. 
• Quality $3.09bn asset portfolio (433 properties) with Weighted Average Lease Expiry (WALE) of 10.0 years. 
• Majority of assets on triple net leases, where the tenant is responsible for all property outgoings. 
• Waypoint REIT leases to Viva Energy who has an Alliance Agreement/Site Agreements with Coles Express and a brand License Agreement with Shell. 
• Potential expansion of property network by way of earnings accretive acquisitions. 
•  Solid capital management with gearing with flexibility to make further acquisitions. 
• High barrier to entry; difficult to replicate asset portfolio.

Key Risks

• Tenant concentration risk. 
• Termination of the alliance agreement with Coles Express. 
• Competition by other branded service stations. 
• Increased cost of fuel supply putting pressure on tenants. 
• The sale of properties in the portfolio resulting in lower rental income. 
•  Potential for excess supply of service stations thus affecting valuations and other property metrics of the portfolio.

Key Highlights: Relative to the pcp and on a constant currency basis: 

• Statutory net profit of $443.6m, up +58.5%, driven by 40bp of cap rate compression across the portfolio. 
• Distributable Earnings of $122.6m, up +3.5%. Distributable Earnings per security of 15.80 cents, up +4.25% (versus 15.15 cents in FY20).
•  Net tangible assets per security at FY21-end of $2.95, up +18.5% versus $2.49 in the pcp. 
• 159 properties (or over one-third of the portfolio) were independently valued with directors’ valuations for the remaining assets, resulting in a gross valuation uplift of $320.1m and portfolio weighted average capitalisation rate (WACR) tightening from 5.56% at FY20-end to 5.16% at FY21-end. 
• 40 non-core assets were divested for $137.1m, or a +10.5% premium to prevailing book value.
• Weighted average lease expiry of 10.0 years, with five leases renewed during the year for an overall +3.5% increase in rent. 
• WPR’s balance sheet remains strong with gearing of 30.1% is within the 30-40% target gearing range, with $59.6m of liquidity currently available and no debt expiring until 2024. WPR’s $200.0m Australian medium term note issuance and $285.0m of bank debt refinanced, extending weighted average debt maturity from 4.3 years to 5.0 years at FY21-end. 73% of debt hedged at FY21-end with a weighted average hedge maturity of 3.6 years. 
• WPR completed $173.3m of capital management initiatives including buy-back of 15.3m stapled securities for $41.1m (average price of $2.68 per security), a $132.2m return of capital (17cps) and a security consolidation approved by securityholders. 

Company Description

Waypoint REIT Ltd (WPR) is an Australian listed REIT that owns a portfolio of service stations across all of Australia’s states and territories. It currently owns 469 service stations in its portfolio. Its service stations are leased on a long-term basis to Viva Energy Australia who has licence and brand agreements with Shell and Coles Express.

(Source: Banyantree)

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