Dexus (ASX: DXS), domiciled in Australia, is a REIT (Real Estate Investment Trust) which aims to invest in high-quality Australian industrial properties and offices directly. It also manages healthcare, retail, office, and industrial properties actively across Australia on behalf of third-party capital partners. It has a portfolio of 53 office properties around Australia of $28.9 billion as at 31 December 2018. Currently, it is managing 85 industrial properties, 15 shopping centres and two healthcare properties nationally.
Today, DXS has released its 1H FY19 results. It saw an increase of 9.8% over pcp in Funds from Operations (FFO), reported at A$353.3 million and a 14.49% increase in Adjusted Funds from Operations (AFFO), reported at A$282.0 million. AFFO per security was reported at 27.7 cents with a payout ratio of 98.1%. DXS will be paying a dividend of 27.2 cents for 1H19 on 28 February 2019. This was up by 14.8% on pcp. DXS has extended its debt duration to 7.3 years through the completion of its longest-dated debt transaction.
The net profit after tax was down by 27.2% on pcp and was reported at A$726.4 million. This was on account of lower net revaluation gains of investment properties realised as compared to the previous corresponding period. It reported revaluation gains of A$456.5 million for 1H19 which were A$273.7 million lower than pcp. Its gearing (look-through) was targeted in the range of 30% – 40% but was reported at 23.7% with an average cost of debt of 4.2%.
Under the property portfolio, it reported a one-year unlevered total return of 15.5% in the industrial portfolio and 13.0% in office portfolio with an occupancy rate of 97.3% (office portfolio). It replenished the development properties that are in the pipeline worth A$5.2 billion.
Under the funds management, it established a new unlisted trust of circa A$2 billion that invests in Australian logistics properties. It reported outperformance in Dexus Wholesale Property Fund (DWPF) with a one-year total return of 12.54%.
Under the trading portfolio, it delivered a trading profit after tax of A$34.7 million and further, progressed developments to contribute to trading profits in the future years.
The weighted average cap rate for office portfolio reduced from 5.37% in FY18 to 5.22% in 1H19. Similarly, the weighted average cap rate for industrial portfolio reduced from 6.40% in FY18 to 6.14% in 1H19. This led to the reduction in the overall portfolio weighted average cap rate of 16 bps over FY18 and was reported at 5.36% in 1H19.
Development works started at 240 St Georges Terrace in Perth which is due for completion in late 2020. Construction topped out at 100 Mount Street in North Sydney, with the development expected to complete in May 2019.
Dexus has reaffirmed its market guidance for distribution per security growth of circa 5% for the 12 months ending 30 June 2019.
Looking at Dexus stock performance, it has generated a positive return of 15.88% during the past six months. It is currently trading at A$11.805 (as on 06 February 2019, 02:39 pm AEST) with a surge of 0.468% in the price during the day’s performance.
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