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Charter Hall Retail REIT (ASX:CQR) has announced 1H FY19 results for the period 1 July 2018 to 31 December 2018.
The company delivered results in line with the market expectations with 1H 2019 operating earnings and distribution growth per unit of 2 percent and the total net income decreased by 3.4 percent.
Charter Hall's Retail CEO, Greg Chubb believes that the company could deliver a stable set of results due to the company's diligent focus on convenience plus centres that cater to everyday needs retail.Â
The company has managed to improve its portfolio quality and earnings in 1H 2019, and this was made possible through active asset management, redevelopments, the selling of lower growth properties, and selective high growth asset acquisitions.
The company made a strategic acquisition of Campbellfield Plaza for a total outlay of $74 million. With Campbellfield Plaza acquisition, the company got access to the high-quality dominant convenience-plus shopping centre, with a secure income profile.
CQR was not only making acquisitions during 1H 2019, it also divested two lower growth assets, Coomera Square, QLD and a freestanding Woolworths asset at Young, NSW for a total consideration of $76.1 million. These sales were in alignment with the REIT's strategy towards realizing better prospects for long-term income and capital growth.
Also, during the period, the company sold 47.5% of Salamander Bay, for a total amount of $83.1 million. With this, the management aims to reduce the company's single asset exposure, at the same time retaining majority ownership of a high-quality convenience plus centre and providing future financial flexibility for the REIT.
Across the REIT's 58 property portfolio, property values increased $15 million, predominantly driven by income growth across the portfolio.
Operationally,  the company delivered a stable set of numbers with convenience-based supermarket- occupancy of 98.1% and like for like NPI growth of 2.1% in 1H 2019, up from 1.8% in June 2018. During the reporting period, CQR improved its leasing spread to 1.9 percent vs. 1.3% in June 2018
The Supermarket component in the portfolio delivered a healthy performance with 74% of major tenant rental income generated by supermarkets and 55% of supermarket tenants now paying turnover rent, vs. 53% in June 2018. The company witnessed a 2.7% MAT growth in Supermarkets turnover
The company during the reporting period undertook changes in the portfolio in the form of additions and redevelopments;
(1) First Bunnings retail outlet was added to the portfolio.
(2) The Company undertook redevelopment of Lake Macquarie Fair, NSW at the cost of $60 million with a new expanded Coles supermarket opening in January 2019. Coles is now the second largest retail group in the portfolio following the demerger from Wesfarmers.
(3) Redevelopment of Wanneroo Central, WA for a total consideration of $11 million.
On the balance sheet front, CQR refinanced its debt maturing in the next couple of years, with that the average debt maturity is at 5.3 years and the balance sheet gearing is maintained at 32.2 percent.
The company guided for the operating earnings to grow by 2% over FY18 and 90% to 95% of operating earnings to be distributed. The company expects supermarkets sales to continue to remain strong.
Charter Hall Retail REITâs market capitalization stands at A$1.83 billion. The Stock price was noted as A$4.590 (21th February 201, 2:25 PM AEST) with 52-week low as A$3.610 and 52-week high as A$4.725. The company reflects a PE ratio of 15.110x, EPS of 0.301 AUD and Dividend yield of 6.27%.
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