Dividends in Real Estate Zone - NSR Under The Spotlight

  • Nov 13, 2019 AEDT
  • Team Kalkine
Dividends in Real Estate Zone - NSR Under The Spotlight

With interest rates at record low levels, investors continue to search for income alternatives to more traditional assets such as cash, term deposits and bonds. In the present scenario, Real Estate Investment Trusts are looking more favourable than they ever were.

Real Estate Investment Trusts (REITs) own or finance income-producing real estate in a range of property sectors, allowing investors to invest in portfolios of real estate assets while providing the opportunity to access dividend-based income and total returns.

As per Chief investment officer of Atlas Funds Management, Hugh Dive, the property trusts listed on ASX owns diverse assets which can be broken down into five distinct groups:

  • Large shopping centres (consumer discretionary retail)
  • Small neighbourhood centres (consumer staples retailing)
  • Office towers (office)
  • Manufacturing or distribution centres (industrial)
  • Housing and apartment developers (residential)

Reasons to Invest in REIT

REIT is an investment where one can generate secure, stable, growing distributions with the long-term potential for capital growth. Besides providing access to a wide range of different asset types, REITs offers liquidity as well as a stable yield to investors.

REITs offer investors a simple way to invest in large commercial investment opportunities and in turn, the rental yields delivered by these real estate assets are passed on as distributions/dividends to investors on a pre-tax basis.

REITs are known for providing consistent distributions mainly derived from the rental income earned on the trust’s properties.

Spotlight on National Storage REIT (ASX: NSR)

National Storage REIT (ASX: NSR) is the only ASX-listed internally managed and fully integrated owner and operator of self-storage centres, providing solutions to more than 60,000 customers across Australia and New Zealand.

The company operates a diverse business model with multiple revenue drivers including self-storage which encompasses private storage, business storage, hard stand/vehicle storage and wine storage at NSR’s climate-controlled storage facilities branded “Wine Ark” developments and project management.

NSR held its 2019 Annual general Meeting (AGM) today, wherein it reported that, financial year 2019 (year ended 30 June 2019) was another successful year of growth for National Storage.

During the year, NSR completed two institutional placements and offered a security purchase plan (SPP), raising $358 million, allowing it to reduce gearing, maintain funding flexibility and support future growth.

NSR saw record growth of 36% in its Assets Under Management (AUM) in FY19. During the year, 180,000 sqm of net lettable area was added to the NSR portfolio through 35 acquisitions, which averaged a new acquisition every ten days across the year – a credit to the team.

This year, the company delivered distributions in line with guidance at 9.6 cents per stapled security. This includes, a final distribution of 5.1 cents per stapled security for the 6 months to 30 June 201 9, paid on 5 September 2019 and an interim distribution of 4. 5 cents per stapled security for the period 1 July 201 8 to 31 December 2018, paid on 1 March 2019.

Notably, in the last three years, NSR delivered total shareholder returns in excess of 30% while the market continues to show support for National Storage.

Operational update provided at AGM

  • Net NLA improvement of over 8,000sqm in the first 4 months compared same period last year;
  • Move-in rate continues to improve;
  • Operational transformation plan progressing as planned
  • Roll out of marketing review underway aimed at delivering improved enquiry levels
  • New website on track for delivery in December 2019

Underlying earnings up 21% in FY19

In FY19, the company earned Underlying earnings of $62.4 million, up 21% on last year. For FY19, the company reported Underlying EPS of 9.6 cents per stapled security. During the year, the company earned revenue of $159.2 million, up 14% on last year.

Last year, the company was focussed on the active revenue management platform that has delivered growth across previous years. The refinement of the company’s advanced revenue management modelling system, together with a storage specific data analytics platform continues to deliver efficiencies and enhance scalability across the operating platform.

The company has successfully transacted 35 acquisitions and 4 development sites in FY19 and continues to pursue high-quality acquisitions across Australia and New Zealand. The ability to acquire and integrate strategic accretive acquisitions is one of National Storage’s major competitive advantages and a cornerstone of its growth strategy. This active growth strategy also strengthens and scales the National Storage operating platform which drives efficiencies across the business.

The key drivers of the business are:

  • Asset Management – driving an appropriate balance between rental rate and occupancy growth and actively pursuing other business development initiatives in complementary areas such as wine storage, document storage and mini-logistics for SMEs;
  • Portfolio Management – acquiring and integrating quality self-storage assets into the NSR portfolio;
  • Development Management – development / refurbishment / redevelopment of new and existing centres and actively managing portfolio recycling opportunities;
  • Centre Management – effective operation of individual self-storage assets and the expansion of the National Storage Centre Management platform (revenue from third parties);
  • Capital Management – maintaining an appropriate and efficient capital structure with a focus on risk minimisation and the development of long term sustainable and growing revenue streams; and
  • Product and innovation – exploring opportunities for revenue exploring opportunities for revenue generation across new sales channels, digital strategies and ancillary product ranges.

FY2020 Outlook

  • Underlying earnings growth of greater than 25%
  • Underlying EPS growth of greater than 4%

NSR aspires to deliver investors a stable and growing income stream from a diversified portfolio of high-quality self-storage assets and to drive income and capital growth through active asset and portfolio management. NSR believes that it is well placed to execute its strategy and deliver stable and growing returns for its investors.

NSR Stock Performance

In the last five year, NSR stock price has increased by 36.09% as on 12 November 2019. At market close on 12 November 2019, NSR stock was trading at a price of $1.870, down by 2.35% intraday, with a market cap of $1.51 billion. The stock is trading near to its 52 weeks high price of $1.925. NSR is trading at a very high PE multiple of 230.72x with a dividend yield of 5.01%.


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