Tag: Australian Market
Investment Thesis
- The DCF valuation of CSL is >10% above the current share price.
- Strong FY23 earnings guidance momentum as CSL continues to see strong demand.
- Seqirus flu business which recorded its first year of positive earnings (EBIT) in FY18 and continues to perform well.
- Strong demand for their portfolio of products.
- High barriers to entry in establishing expertise + global channels + operations/facilities/assets.
- Strong management team and operational capabilities.
- Leveraged to a falling dollar.
Key Risks
- Competitive pressures.
- Product recall / core Behring business disappoints.
- Growth disappoints (underperform company guidance).
- Turnaround in Seqirus flu business stalls or deteriorates.
- Adverse currency movements (AUD, EUR, USD)
Key Highlights: Relative to the pcp and on a constant currency basis:
- Revenue was up +3% to $10,242m, driven by strong growth in haemophilia B product IDELVION® and key specialty product KCENTRA®, up +20% and 18% respectively, and strong performance in its influenza vaccines business, CSL Seqirus, which saw revenue up +13%. HPV royalties were up 55% rebounding strongly to now exceed pre-Covid levels following strong demand and increased supply.
- NPAT of $2,236m, down -6% was at the top end of guidance, despite a difficult global environment, and immunoglobulin sales limited by constrained plasma collections in FY21, which however, improved 2H22 which saw growth in plasma collected.
- Earnings per share of $4.81, was down -8%.
- Acquisition of Vifor Pharma completed on 9 August 2022.
- By key segments. CSL Behring: Revenue was up +2% to $8,598m driven by Haemophila, up 8% to $1,166m, and Specialty, up +3% to $1,792m, offsetting Immunoglobulins, down -3% to $4,024m and Albumin, down -1% to $1,072m. The segment was driven by IDELVION, up +20%; KCENTRA, up +18%; HAEGARDA, up +5%; HPV royalties, up +55%; whilst Immunoglobulin declined -3%. Plasma collected was up +24%. Gross profit of $4,580m was down -4%, whilst gross profit margin fell to 53.3% from 56.5%.
- CSL Seqirus: Revenue of $1,964m was up +13%. Seasonal influenza vaccines sales were up +16% driven by US sales which were greater than $1bn for the first time and FLUAD® was up +41%. The segment saw record volume of ~135 million doses distributed in FY22. On a further positive note, the US Centers for Disease Control and Prevention adopted the Advisory Committee on Immunisation Practices recommendation that FLUAD® be a preferentially recommended seasonal vaccine option for adults aged 65+ years. Gross profit of $1,152m was up +16%, whilst gross profit margin improved to 58.7% from 57.3%.
Company Description
CSL Limited (CSL) develops, manufactures and markets human pharmaceutical and diagnostic products from human plasma. The company’s products include pediatric and adult vaccines, infection, pain medicine, skin disorder remedies, anti-venoms, anticoagulants and immunoglobulins. These products are non-discretionary life-saving products.
(Source: Banyantree)
DISCLAIMER for General Advice: (This document is for general advice only).
This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.
The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require. The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.
The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.
Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.
Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents. Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material. Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.
The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.
Investment Thesis:
- CQE trades on a ~6.7% discount current NTA, which is not justified.
- Solid dividend yield.
- Quality assets with strong property fundamentals such as 100% occupancy and WALE of 14.3 years.
- Majority of leases are triple-net leases.
- CQE is a play on (1) population growth; (2) increasing awareness of early childhood education; (3) increasing the number of families with both parents working and hence demand for childcare services. CQE has increased its portfolio weighting towards social infrastructure assets.
- CQE’s tenants possess strong financials
- Strong history of delivering continuing shareholder return and dividends.
- Solid balance sheet position.
- Strong tailwinds for childcare assets and social infrastructure assets.
Key Risks:
- Regulatory risks.
- Deteriorating property fundamentals.
- Concentrated tenancy risk, especially around Goodstart Early Learning.
- Sentiment towards REITs as bond proxy stocks impacted by expected cash rate hikes.
- Broader reintroduction of stringent lockdowns across Australia due to Covid-19.
Key Highlights: FY22 Results Highlights. Relative to the pcp: Statutory profit of $358.5m, up $184.4m relative to the pcp.
- Operating earnings of $62.9m, was up +8.4%. Operating earnings of 17.3cpu, up +8.1%.
- The REIT declared distribution of 17.2 cpu, up +9.6%.
- Gross assets of $2.1bn, up 35.0% since June 2021. Net Tangible Assets of $4.08 per unit up +25.5% since June 2021.
- CQE has a weighted average debt maturity of 3.9 years and no debt maturity until January 2025. As at 30 June 2022, including contractual commitments, CQE’s balance sheet gearing is 29.8% and look-through gearing is 30.7%. CQE’s available investment capacity is $160m, comprising undrawn debt facilities.
- Property Portfolio Highlights. CQE’s property portfolio saw a valuation uplift of $269.43m or +19.4%. This resulted in the passing yield across the property portfolio firming to 4.7%. Overall, CQE property portfolio was up +38.8% to $1.97bn via both acquisition and valuation activities during FY22.
- CQE made $232.7m of social infrastructure assets acquisitions including 234 childcare assets, 25 healthcare assets and a 50% interest in a recently completed TAFE Queensland education campus.
- CQE completed 6 childcare development assets with a total value of $42.3m.
- CQE’s property portfolio retained a long WALE of 14.3 years, 100% occupancy, and solid lease expiry profile with less than 5% of leases expiring within the next five years. According to management, 75% of leases are on fixed rent reviews (average 3.0%) and the balance CPI-linked; and 44% of rental income subject to market rent reviews within the next 5 years. CQE retained strong tenant customers including Goodstart Early Learning, G8 Education, Only About Children, Mater Misericordiae, Busy Bees, Healius and both state and local Governments.
- Property Portfolio
Company Description:
Charter Hall Social Infrastructure REIT (formerly Charterhall Education Trust) (ASX: CQE) is an ASX listed Real Estate Investment Trust (REIT). It is the largest Australian property trust investing in early learning properties within Australia and New Zealand but recently widen its mandate to also invest in social infrastructure properties.
(Source: Banyantree)
DISCLAIMER for General Advice: (This document is for general advice only).
This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.
The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require. The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.
The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.
Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.
Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents. Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material. Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.
The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.
Investment Thesis:
- Sizeable market opportunity – in the U.S. alone WSP TAM is US$4.7bn (WSP North American target markets) vs total U.S. CPaaS TAM of US$98bn.
- Established a solid foundation to build from – the Company has over 800 customers worldwide with leading brand names.
- Structural tailwinds – ongoing automation and digitization.
- Increasing direct sales penetration.
- Attractive recurring revenue base via subscriptions.
- Investment in R&D to continue developing the Company’s competitive position and enhance value proposition with customers.
Key Risks:
- Rising competitive pressures.
- Growth disappoints the market, given the company trades on high valuation multiples – growth in subscriptions, new customers and penetration of existing clients.
- Product innovation stalls and fails to resonate with customers.
- Emergence of new competitors and technology.
- Key channel partnerships breakdown.
Key Highlights: Headline FY22 results. Group revenue of $70.6m was up +48% YoY and ahead of management’s guidance range of $64-68m. Management noted the Company is seeing growing interest in the Whispir platform from governments and government agencies, as highlighted by the recent high-profile launch by Victoria Police of the public transport initiative “STOPIT”, which is built on the Whispir platform.
- Regional performance – ANZ region was up $22m (or +56%) to $62m revenue for FY22, which was driven by the pandemic response (Covid-19 vaccine rollout programs). North America revenue was up +38% to $1.8m, with management highlighting growth opportunities in this market and WSP’s investment in digital marketing campaigns to drive revenue growth. Asia revenue of $6.7m was mostly flat YoY due to the region still being impacted by Covid-19 related disruptions and lockdowns (e.g., fresh China lockdowns in July). However, WSP recently signed contract with telco Singtel should drive growth in the region.
- Customer churn of 2.1% was +30bps better than 2.4% in pcp.
- Group gross margin (GM) was down -130bps to 58.5%, due to change in revenue mix – that is, a higher revenue contribution from transaction revenue which has lower GM than platform and services. On a positive note, GM on transaction revenue also improved +250bps over the year (with further improvement expected), whilst GM on platform and services was unchanged YoY.
- Group operating earnings (EBITDA) for the year was a loss of $10.6m, which was ahead of the guidance which was looking for a loss of $11.2 – 13.2m for FY22. EBITDA building blocks: ANZ $16.1m + Asia loss $2.5m + North America loss $4.7m + R&D cost $16.2m + Corporate costs $11.9m. Management is “firmly” focused on becoming EBITDA positive by 2H23. Operating expenses in 4Q22 were -11% below 3Q22, driven by efficiencies program.
- Balance sheet remains well placed with $26.1m in cash and no debt, which should take the company to profitability in FY23 and cash flow positive by FY24.
Company Description:
Whispir Ltd (WSP), founded in 2001, is a global enterprise software-as-a-service (SasS) company. WSP provides a communications workflow platform that automates interactions between businesses and people. The Company has over 800 customers, operates in 60 countries and more than 200 staff globally. WSP operates in an emerging subset of the enterprise communications SaaS market known as Workflow Communications-as-a-Service (WCaaS). WSP currently solves two communication problems: (1) Operational Messaging – engaging with employees; and (2) External Messaging – engaging with customers. WSP operates in 3 key markets – Operational messaging (size $8bn), API messaging (size $32bn) and Marketing messages (size $66bn).
(Source: Banyantree)
DISCLAIMER for General Advice: (This document is for general advice only).
This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.
The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require. The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.
The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.
Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.
Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents. Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material. Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.
The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.
Investment Thesis:
- Clear 1 market position in online property classifieds, with consumers spending over more time on realestate.com.au app than the number two website.
- Growth opportunities via expansion into Asia and North America.
- Recent strategic partnerships with National Australia Bank (property finance) could potentially be positive in the long term.
- Upside in key markets – particular in areas where REA is under-penetrated and could potentially win market share from competitors.
- New product developments to increase customer experience.
- Regular price increases help offset listing pressure.
Key Risks:
- Competitive pressures lead to a further de-rating of the PE-multiple.
- Volume (listings) outlook remains subdued in the near term.
- Execution risk with Asia/North America strategy.
- Failing to get an adequate return on the recent acquisition of iProperty.
- Value/EPS destructive acquisitions.
- Decline in Australian property market.
- Given REA trades on a very high PE-multiple, underperforming to market estimates can exacerbate a share price de-rating.
- Recent tightening of lending practices by banks would affect the Financial services business.
FY22 Results Highlights: Relative to the pcp: Revenue of $1,170m, up +26%.
- EBITDA (including associates) of $674m, up +19%. Core operating costs jumped +34%, mainly due to Mortgage Choice and REA India acquisitions. Excluding acquisitions, core operating costs increased +11%, reflecting a tight labour market driving higher remuneration costs, an increase in revenue-related variable costs, and investment in brand and marketing.
- Net profit of $408m, up +25%. EPS of 308 cents, up 25%.
- The Board declared a fully franked final dividend of 89cps which brings the full year dividend to 164cps, up 25%.
- REA retains a solid balance sheet. As at 30 June 2022, REA’s total drawn debt was $414m, with a cash balance of $248m. Free cash flow generation remains strong at $394m in FY22, up +55%.
- Performance by segments. Relative to the pcp: Australia. In Australia, REA operates realestate.com.au and realcommercial.com.au, data and insights business, PropTrack, and mortgage broking business, Mortgage Choice. Core revenue of $1,116m was up 23%, or 18% excluding the impact of the Mortgage Choice acquisition, driven by Residential revenue up +24% to $776m, Commercial and Developer revenue up +3% to $134m, Media, Data and Other revenue up +9% to $97m, and Financial Services core operating revenue jumping +12%, on a pro forma basis to $79m (assuming REA owned Mortgage Choice in the prior period). India. REA India achieved strong results with revenue growth of 92% to $54m on a pro forma basis (assuming it was owned for the full prior period), largely driven by Housing.com’s property advertising business, which saw strong customer growth.
- Equity accounted investments. REA has a 20% investment in Move, Inc. (Move) which operates realtor.com®, a property portal in North America. Move revenue increased 11% on traditional lead generation and referral model growth. However, Move also saw higher employee and marketing costs as the business continues to reinvest. This resulted in a $2m decline in Move’s equity accounted contribution to $14m. REA also holds a 17.5% stake in PropertyGuru Group Ltd, which contributed an equity accounted loss of $6m in FY22 to core EBITDA.
- FY22 Results
Company Description:
REA Group (REA) provides online property listings, web management, financial services and data analytics to the real estate industry via advertising services. For consumers, REA offers the largest online real estate search engine in Australia. The Company also has operations and a growing presence in Asia and other parts of the world.
(Source: Banyantree)
DISCLAIMER for General Advice: (This document is for general advice only).
This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.
The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require. The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.
The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.
Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.
Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents. Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material. Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.
The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.
Investment Thesis
- Ex Covid-19, stock trades on an attractive gross dividend yield.
- The concern for VCX is that cap rates and asset valuations need to be adjusted for weak domestic economic data points around the consumer.
- High quality property portfolio (high occupancy, stable rental growth etc.) with resilience to weakening retail sales environment through its portfolio repositioning.
- Decent development pipeline to power growth at decent initial yield and IRR.
- Retail environment remains challenging and expected to remain so over the next 12 months as households remain constrained by high debt levels & lack of wage growth despite stable unemployment in the eastern states.
- Strong specialty growth across retail categories, especially Luxury stores (+30.2% over the 12 months to 31 December 2019).
Key Risks
- Corona virus affects consumer sentiment and retail stores, which affects VCX’s tenants
- Increase in interest rates adversely affecting the Company’s cost of debt and consumer spending in the retail sector.
- Rise in unemployment, resulting in lower consumer retail spend and thereafter affecting rental growth and property valuations.
- Inability to mitigate consequences that arise from a weak retail environment.
- Weaker property fundamentals than expected.
- Tenancy risk/retailer bankruptcies resulting in higher vacancies across the asset portfolio (e.g. Dick Smith) and adverse effect on earnings.
- Development schedule delays and project cost blowouts.
- Any reduction in investor interest for bond-proxy stocks.
Key Highlights
- “Vicinity expects FY23 FFO per security to be in the range of 13.0 to 13.6 cents, AFFO per security to be in the range of 10.9 to 11.5cents and full-year distribution to be within Vicinity’s target range of 95-100% of AFFO. Adjusting for waivers and provisions written back in FY22, the FFO per security guidance for FY23 represents between 10% and 15% growth, which is expected to be driven by continued growth in rental and ancillary income and strengthening cash collections, partially offset by higher net interest costs”
- The Board declared a final distribution 5.7cps, which brings full year distribution to 10.4cps, which equates to payout ratio of 95.3% of AFFO, within Vicinity’s target payout range.
- VCX continues to execute on its $2.9bn retail and mixed-use development pipeline of projects which are expected to complete between FY23 and FY27, with ~85% of the development spend focused on six major mixed-use opportunities including Chadstone, Box Hill Central and Victoria Gardens in Victoria, Chatswood Chase Sydney and Bankstown Central in NSW and Buranda Village in Queensland. During FY22, VCX commenced Chadstone’s new Entertainment and Leisure precinct, expected to complete by FY23-end; remixed and upgraded the retail precinct in Box Hill Central South; commenced the fresh food and mini majors’ precincts at Bankstown Central; completed upgrades at Mornington Central.
Company Description
Vicinity Centres Ltd (VCX) is an ASX listed REIT holding a quality retail portfolio and fully integrated asset management platform. VCX owns ~A$15.7 billion of retail assets. Some notable retail assets that Vicinity Centres owns or has an interest in: Chatswood Chase (NSW), Chadstone Shopping Centre (VIC), DFO South Wharf (VIC), QueensPlaza (QLD), Emporium Melbourne (VIC) and DFO Homebush (NSW). VCX is the result of the merger between Federation Centres and Novion Property Group.
(Source: Banyantree)
DISCLAIMER for General Advice: (This document is for general advice only).
This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.
The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require. The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.
The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.
Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.
Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents. Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material. Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.
The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.
Investment Thesis:
- Improving underlying conditions, although some uncertainty remains.
- Solid portfolio across Retail, Office and Logistics but short-term risk around valuations and property fundamentals due to Covid-19.
- Diversified with Funds Management business generating income.
- Balance sheet strength with gearing ratio at 28.2%, well within target range of 25-35%.
- Strong tenant demand for the GPT east coast assets.
Key Risks:
- Breach of debt covenants.
- Inability to repay debt maturities as they fall due.
- Deterioration in property fundamentals, especially delays with developments.
- Environment of expected interest rate hikes.
- Downward asset revaluations.
- Retailer bankruptcies and rising vacancies.
- Outflow of funds in the Funds Management business reducing GPT’s income.
- Tenant defaults as the economic landscape changes.
Key Highlights: FY22 outlook – FFO guidance upgraded to higher end of prior range. Management expects: FFO of ~32.4cps, up +12.4% y/y vs prior guidance of 31.7-32.4cps.
- Distribution of 25cps, up +7.8% y/y.
- Cost of debt to increase y/y with further increase in FY23 driven by increase in cash rate from RBA.
- Retail sales growth to moderate, which combined with fixed rental increases and positive leasing demand should keep good momentum across the retail portfolio.
- Office leasing volumes to improve.
- Logistics portfolio to benefit from strong rental growth, partially offset by increased development costs amid escalation in construction costs.
- Capital management. Distribution per security of 12.7 cents, down -4.5% y/y largely as a result of an increase in leasing incentives, equating to a 100% payout of operating FCF, up +10bps y/y.
- Ample liquidity of $1,124m, up +20.3% over 2H21, held in cash and undrawn bank facilities.
- Strong balance sheet with gearing of 27.3%, down -90bps y/y and towards the lower end of management’s gearing range of 25-35% and investment grade credit ratings of A (negative)/A2 (stable) by S&P/Moody’s.
- Debt profile remains 71% hedged. To address the impact of rising interest rates, management increased hedging levels substantially in late July, resulting in the Group being 71% hedged on drawn debt for the next 2.5 years at an average rate of 2.8% (fixed hedge rate for FY22 at 1.7% and increases in FY23 to 2.6% for 80% of current debt). Management expects all-in cost of debt to be in the low 3% range in FY22 and increase to the low to mid 4% range in FY23 with a high level of hedge protection in place.
- 1H22 results summary. Funds from Operations (FFO) increased +8% y/y to $326.5m, driven by a +3% y/y increase in Retail, +10.7% y/y increase in Office, +20.8% y/y increase in Logistics and +15.1% increase in Funds Management, partially offset by +22.1% y/y increase in finance costs amid higher debt from acquisitions and developments and +13.8% y/y increase in corporate overheads due to higher technology and reorganisation costs and FFO per security increased +9% y/y to 17.04 cents.
- NPAT declined -30.3% y/y to $529.7m primarily due to investment property valuation increases of $219.5m, down -53.5% y/y.
- Net Tangible Assets (NTA) increased +2.8% over 2H21 to $6.26 per security, driven by revaluation gains for both the Logistics and Retail portfolios primarily due to rental growth and development completions.
- 12-month total return was 10.8%, reflecting an FFO yield of 5.2% and a capital return of 5.6%.
- Operating cashflow declined -6% y/y to $271.8m and FCF declined -4.6% y/y to $243.3m, driven by a higher amount of lease incentives paid in Office.
Company Description:
GPT Group (GPT) owns and manages a portfolio of high-quality Australian property assets, these include Office, Business Parks and Prime Shopping Centres. Whilst the core business is focused around the Retail, Office and Logistics, it also has a Funds Management (FM) business that generates income for the company through funds management, property management and development management fees. GPT’s FM business has the following funds, GPT Wholesale Office Fund (GWOF – A$6.1b) launched in July 2006, GPT Wholesale Shopping Centre Fund (GWSCF – A$3.9b) launched in March 2007 and GPT Metro Office fund (GMF – A$400m) launched in 2014.
(Source: Banyantree)
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