BWP has a portfolio of 65 core properties, which, for the most part, are leased to Bunnings Warehouse. The $2.6b company has low gearing, highly favourable lease agreements with long-term tenants, and low gearing of just ~16%. They are expected to pay ~5.5% yield over the next 12 months, while we are also seeing some opportunities to grow earnings from here. While having a heavy reliance on one tenant does add some risk to earnings, the Wesfarmers-owned Bunnings is a very reliable company to lean on and has shown a very low turnover of sites in recent years. BWP has also shown its ability to repurpose ex-Bunnings sites into retail or warehouse developments, generating strong returns on the back of it.
The company has been somewhat quiet on the acquisition front, choosing not to overextend the balance sheet as property prices spiked. Last week, though, they made a play for Newmark Property (NPR), which falls right into the BWP wheelhouse. NPR owns 9 properties, with Wesfarmers being their largest tenant (Bunnings, Officeworks & Kmart), accounting for nearly 75% of income. As most of the sites are newer builds, the company has less than 4% of leases by value expire before the start of FY26, providing a strong base of secure earnings. NPR has dialled up their debt over recent years, though, which has caused some pressure on the share price. While BWP’s all-scrip takeover was made at ~43% premium to Newmark’s prior close, it still represents more than a 15% discount on a Net Tangible Asset (NTA) basis. We think this is a good deal from BWP and see an opportunity to reduce the combined cost of debt on the back of it, adding to earnings.
MM is interested in BWP from a defensive mid-cap perspective
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