KPG, APL, PFI: 3 REITs in focus post RBNZ’s rate hike

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KPG, APL, PFI: 3 REITs in focus post RBNZ’s rate hike

 KPG, APL, PFI: 3 REITs in focus post RBNZ’s rate hike
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Highlights

  • A high OCR implies higher interest rates for mortgages and home buyers.
  • Kiwi Property registered a 14.1% rise in NPAT of $224.3 million in FY22.
  • PFI plans to begin its on-market share buyback program on 31 May 2022.

The RBNZ has been taking steps to contain surging inflation while navigating economic challenges like a tight labour market and productive capacity constraints. However, house prices have been on a falling trend after traversing the COVID-19 pandemic.

After the RBNZ raised rates by 50bps on 25 May, the OCR now stands at 2%, the highest level attained since 2016. The hike was considered necessary by the central bank to preserve price steadiness and encourage maximum sustainable employment.

A high OCR means higher interest rates for mortgages and home buyers.

On this note, let’s look at how these 3 REITs are faring.

Source: © 2022 Kalkine Media®

Kiwi Property Group (NZX:KPG)

NZX-listed property firm Kiwi Property has a market cap of $1.5 billion and has given a YTD return of 15.8%.

ALSO READ: IFT, KPG, FBU: 3 housing stocks to eye ahead of OCR announcement

The Group registered a 14.1% rise in NPAT of $224.3 million in FY22, propelled by rises in both income and asset values. Improving trading conditions bolstered a 3.5% gain in the fair value of its varied property portfolio and Group’s net rental income rose 7.8% to $187.1 million.

DO READ: Kiwi Property (NZX:KPG) sees 14% rise in its NPAT; shares up ~4%

KPG built considerable momentum on its ambition to form mixed-use communities at key metropolitan centres in FY22. It plans to pay a final dividend of 2.85cps for the six months ended 31 March 2022.

KPG ended the day 0.5% in the red to close at $1.005.

Asset Plus Limited (NZX:APL

Engaged in property-related activities, Asset Plus, has a market cap of $97 million and has given a YTD return of -12.9%.

The Group’s profit fell from $15.95 million in previous year to $2.93 million for the year ended 31 March 2022. This was because of a relatively flat valuation and a loss of rental income at the 35 Graham Street property.

ALSO READ: FBU, IFT, APL: 3 stocks on watch amid reports of 20% fall in house prices

APL plans on the delivery and leasing of the Munroe Lane development in April 2023, delayed further due to COVID-19-related disruptions. The Group did not pay any dividend in Q4.

APL ended the day 1.85% in the red to close at $0.265.

 

Property for Industry Limited (NZX:PFI

Involved in the property investment and management business, PFI has a market cap of $1.2 billion.

On 25 May, PFI notified that it would begin its on-market share buyback program on 31 May 2022. PFI will buyback up to 25,173,940 shares, which is equivalent to a maximum aggregate purchase price of nearly $60 million.

ALSO READ: KPG, GMT, PCT: 3 real estate stocks to watch as RBNZ to hike OCR

The Group is not expecting any material change in valuations for forthcoming half-year results.

PFI expects to pay a dividend of 8.1cps, noting that 2022 began strongly in terms of leasing. It is continuing to progress with the redevelopment of brownfield sites with total investment expected to be more than $150 million.

PFI ended the day 1.23% in the red to close at $2.415.

Bottom Line

The main challenge for the real estate market would be to promote borderline buyers who were put back by high-OCR-driven increasing interest rates.

(NOTE: Currency is reported in NZ Dollar unless stated otherwise)

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