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The property market of Australia made a strong comeback last year, and this strength has continued into 2020. The struggling market which witnessed lower dwelling values over a few years gone by showed signs of recovery in the middle of 2019.
The rebound in the property market initiated in the two big cities of Australia, Sydney and Melbourne, had amplified the property market in the other Australian cities as well.
Going through the favourable recent times; the property market players are currently coming up with their earnings reports, while some have witnessed significant expansion through multiple acquisitions.
The Australian property stocks have enjoyed favourable market factors over the period gone by till 31 December 2019 and appear to endure fairly in current times.
Do read: Real Estate players Plunges down amidst strong 1HFY20 performance; A look at NSR, HPI, GOZ, SRV, LLC
Let us look at some of the property stocks listed on ASX and find out if the stocks have taken a positive swing from the favourable market conditions.
CQR Completes Institutional Placement of $100 million
During the last six months, the stock of Charter Hall Retail REIT (ASX:CQR) has undergone a growth of 14% till 19 February 2020 along with registering a statutory profit of $66.7 million for the 1H FY20 results for the period ended 31 December 2019.
Moreover, the Company also reported an increase of 1.7% on pcp in its operating earnings that stood at $70.2 million or 15.88cpu.
During the period, the company maintained the portfolio occupancy at 98.1% and witnessed like-for-like net property income (NPI) growth of 2.2%. Along with this, Charter Hall further boosted the portfolio through acquiring 20% interest in two powerful convenience-based Sydney metropolitan assets, Pacific Square, Maroubra and Bass Hill Plaza.
Further in December 2019, CQR acquired a 14.7% interest in the BP Portfolio comprising of most BP’s owned convenience retail properties in Australia and has continued its investment strategy to provide a resilient and growing income stream for investors through
- Active asset management
- Portfolio enhancement
- Prudent capital management
The Company increased operating earnings growth per unit guidance to 2.2% over FY19, and the distribution payout ratio range is expected to remain between 90% and 95% of operating earnings.
Most recently, CQR successfully completed the fully underwritten institutional placement, which was increased from $90 million to $100 million due to strong demand from new and existing institutional investors.
The Company shall utilise additional proceeds to repay debt and confirms its guidance for FY20 operating earnings growth of 2.3% over FY19.
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NSR Looks to Achieve EPS Growth of 4%
Being the largest self-storage owner-operator in Australia and New Zealand and dedicated on continuing to drive organic growth across its 180+ storage centres, National Storage REIT (ASX:NSR) achieved an A-IFRS profit after tax of $150.7 million for the half-year ended 31 December 2019 and its underlying earnings were up by 31% at $34.5 million.
Despite the tough environment and economic conditions, the NSR business endured through the ambiguities in the key market to register growth across its business during the period and believes that its performance and results validate its strength of the underlying assets and indicate the robustness and superiority of the management platform.
NSR’s acquisition of 14 existing storage centres and one new development site during the period stresses the uniformity of NSR with its strategy and leads the industry consolidation process.
The Company looks forward to enhancing the progressive growth through significant additional capacity in key markets and successfully transacted $179 million worth of acquisitions during the period.
NSR received a proposal from Warburg Pincus (WP) to fully acquire the issued stapled securities of NSR for the cost of approximately $2.20 per NSR stapled security, for which NSR on 28 February 2020 informed the exchange that:
- Warburg Pincus has determined not to go further for the offer to NSR this time and has withdrawn its indicative offer;
- Warburg Pincus has reserved its right to reconsider this decision at any time.
NSR seeks to achieve EPS growth of 4% and underlying earnings of $78 million in upcoming times, while the proposed takeovers by any of the parties could likely impact the timing of revenue related to new developments, joint venture arrangements and acquisitions.
ABP Statutory Profit Down by 36%
Diversified Australian REIT with an investment portfolio concentrated in the Office and Self-Storage sectors, Abacus Property Group (ASX:ABP) increased exposure to its key focus sectors of Office and Self-Storage through a series of acquisitions and joint ventures, aligned with the value-accretive, identified opportunities.
Abacus Platform HY20 Overall (Source: Company's Report)
Moreover, ABP also undertook several transactions to reduce exposure to its non-core legacy investments, and these transactions have resulted in the successful transformation of the balance sheet, with 92% of investment assets deployed into key sectors.
Group statutory profit was down by 36% from $127.8 million in HY19 to $82.1 million in HY20, while the asset base witnessed a growth and Net tangible assets (NTA) per stapled security increased by 2.4% on FY19 and stood at $3.41.
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The Company looks forward to acquiring assets that shall provide income growth, create value over the longer term and deliver superior risk-adjusted returns for its investors committed to executing on its investment strategies for increasing its ABP’s investment in quality Office and Self-Storage assets in target markets and strengthening recurring earnings.
ABP has confirmed distribution guidance of 2% to 3% growth for FY20 remains positive on its outlook and market differentiated AREIT positioning in the Office and Self-Storage sectors and anticipates the combination of judicious investment and active management in both sectors to drive attractive risk adjusted returns for the stakeholders in the medium to long term.
HPI to Issue 9.3 million New Securities
Another Real Estate player that owns a Portfolio of freehold hotels and associated specialty tenancies located throughout Queensland and South Australia, Hotel Property Investments (ASX:HPI) successfully completed fully underwritten institutional placement under which approximately 9.3 million new securities shall be issued at an issue price of $3.23 per security.
The placement attracted strong demand from existing HPI securityholders as well as fresh investors and funds from the placement are anticipated for use in partially funding the acquisition of two metropolitan hotel properties for $60 million and associated transaction costs.
The acquisitions for which the Company entered into agreements to acquire 100% freehold interests are:
- Gregory Hills Hotel for a consideration of $40 million
- Acacia Ridge Hotel for a consideration of $20 million
Acquisition Locations (Source: Company's Report)
The Company acknowledged that the new securities shall be settled on 2 March 2020, with the allotment and normal trading to occur on the very next day and new securities issued under the Placement shall rank equally with existing HPI securities.
HPI also anticipates inviting eligible shareholders to subscribe for up to $30,000 in additional securities, free of any brokerage or transaction costs, at the Placement price of $3.23 per security, under a Security Purchase Plan.
HPI looks forward to taking advantage from its ability to source acquisition opportunities and shall thereby, keep track of the market for additional acquisition prospects that lie parallel with its investment criteria and augments the value of its portfolio.
Also, HPI reaffirmed its FY20 distribution guidance of 20.7 cents per security, and its pro forma metrics following the Acquisitions and Placement at 31 December 2019 are:
- Balance sheet gearing of 38.3%
- NTA per security of $2.95
SCP Records 129.5% Growth in Statutory NPAT
Owner of diversified shopping centres portfolio located throughout Australia, Shopping Centres Australasia Property Group (ASX:SCP) recorded 129.5% increase in its statutory net profit after tax of $90.2 million as compared to the same period last year primarily driven by the investment property valuation increase.
Other highlights include the following:
First Half FY20 Highlights (Source: Company's Report)
SCP’s supermarket and discount department stores sales continue to grow, with both Woolworths and Coles recording positive sales growth and continuing improved performance from Big W stores. Amidst competition from within their catchments, four of the centres acquired in FY19 have shown signs of gradual improvement in sales over the last six months.
Moreover, SCP expects sales growth for these centres to turn positive once the competition impressions cycle through and complete execution of the Company’s repositioning strategy.
The Company looks forward to ensuring:
- Sustainable tenants pay sustainable rents by continuing to improve its tenancy mix with a bias toward non-discretionary categories;
- Maintaining high retention rates on renewals;
- Reducing specialty vacancy by focusing on difficult long-term vacancies;
- Execute further acquisitions of convenience-based shopping centres;
- Recycle capital from lower growth assets to relatively higher growth assets;
- Invest in value-enhancing development opportunities within its existing portfolio and continue to grow its funds management business.
The Company increased its guidance for FY20 FFO to 16.90 cpu, indicating 3.5% increase over FY19 and guidance for FY20 Distributions reached 15.10 cpu (2.7% above FY19), while the FFO guidance excludes any further acquisitions or divestments during the second half of FY20.
Stock Performance of the Stocks
