Listed property companies delivering strong results
Reporting season is off to a strong start for property companies listed on the Australian Securities Exchange with BWP Trust and ALE Property Trust delivering solid results and home builder AV Jennings, which reports later in the month, upgrading its profit guidance through the week.
Listed companies included in the Australian-Real Estate Investment Trust index outperformed those in the broader market in 2015. In the year to July 31, 2015, the S&P/ASX 200 A-REIT gained 21.08% while the S&P/ASX 200 added 5.68%.
BWP Trust, which owns retail properties mainly tenanted by Bunnings, was one of the first property companies to report its results this August. It reported a 13.7% increase in income, a $108.5 million increase in the valuation of its portfolio and a 9.5% increase in distributable profit.
The trust’s managing director Michael Wedgwood said the trust was comfortable with its portfolio although admitted that competition for quality retail properties would be difficult to grow through acquisitions while the low inflation rate was keeping a lid on rental growth.
Morningstar analysts were concerned about the outlook for BWP and said the trust looked overvalued at its recent share price of around $3.30.
“While BWP Trust is a good-quality Australian REIT with secure earnings and a strong balance sheet, we believe the market is underestimating the drag to earnings from lower CPI, lower growth from market rent reviews and rising vacancies,” Morningstar analysts said in a note.
Pub-owner ALE Property Trust, which also reported through the week, surprised the market by increasing its forecast distribution for 2016 to at least 20 cents. It paid out 16.85 cents a security in the 2015 financial year.
ALE’s net profit after tax jumped to $99.4 million, from $37.2 million in 2014, due to increases in property valuations. Distributable profit fell slightly to $29.1 million from $31.2 million.
In further good news from the sector, home builder AV Jennings upgraded its guidance, alerting the market that its full-year profit before tax was likely to be “$47 million or higher”, up from its previous forecast of above $40 million.
AV Jennings was able to complete a number of stages of projects in June, which were not previously expected to complete before the year end when adverse weather in NSW was disrupting development.
The directors said they “remain confident of strong residential market conditions continuing”. The company expects to issue its full year results around August 20 and the directors will give further commentary on their expectations for the market then.