Australian Investment Blog

WHAT MATTERED TODAY

Another choppy session today as the virus continues to create concerning headlines, Victoria again topping the 700 mark in terms of new cases as QLD moves to shun all NSW residents, not just us Sydney siders! Gold the place to be today after topping $US2000/oz, although the Gold stocks have not been as bullish as the precious metal would imply suggesting to us that it’s a bit of a crowded trade.

Around the region today, most Asian market edged marginally higher with the exception of Japan while US Futures ticked around par for much of the day.

Overall, the ASX 200 fell -36pts / -0.60% to close at 6001. Dow Futures are trading up +73pts / 0.27%

A very quiet day in terms of reporting, it really kicks into gear next week, although we do have a few out tomorrow, Mirvac (MGR) in the property space, Nick Scali (NCK) in the retailers both reporting full year numbers while Resmed (RMD) release a quarterly update, look for sales of respirators to more than offset the decline in their sleep apnea products given the issues around elective surgeries at the moment.

A busy day for Centuria today reporting earnings and launching a capital raise in one of their REITs. We had them in the office today and Harry outlines his thoughts from the presentations below.

LOCAL REPORTING CALENDAR: CLICK HERE **Please note, data sourced from Bloomberg, not all ASX companies are on this list and dates can vary**

ASX 200 Chart

ASX 200 Chart

CATCHING MY EYE

Centuria Trusts: it was a busy day for the two listed trusts managed by Centuria – which are currently in the Shaw offices reporting, some insights from my time with them below. Firstly, Centuria Office REIT (COF) +7.38%, reported full year earnings which were surprisingly upbeat despite all the doom and gloom in the office landlord space. The trust owns and operates 23 high quality office buildings across the country with 98.1% of the space leased at the end of the period and a WALE of 4.7 years. Despite the negativity surrounding rent collections, COF managed to collect 92% of lease commitments through the last quarter of the financial year thanks to nearly 80% of the income “derived from, multinational, ASX and government tenants.”

Gearing remains reasonable at 34.5% with interest cover over 6x. Funds from operations (FFO) at 18.6c/unit was slightly behind guidance provided at the half year, however the total distribution for the year at 17.8c was in line. Centuria continue to talk up the office market despite the obvious concerns around absorption of space. While the change to office leases may not be as drastic as, say, the impact on retail landlords, demand for square meterage will go through a structural shift as people return to the workplace after the pandemic. As a result, risks remain around future earnings and they opted against providing FFO guidance for the year ahead. COF did guide to 16.5c of distributions through FY21, which puts it on a very attractive yield of 8.5% at today’s close.

Centuria Office REIT (COF) Chart

Sister fund Centuria Industrial REIT (CIP) didn’t trade today as it looks to raise $340m to fund three acquisitions, the largest of which is a $416.7m purchase of a Telstra data centre in Victoria on a cap rate of 4.25%. The deal is significant, with the asset to make up ~20% of the total asset value in the trust. The purchase comes with a lease back agreement, on a triple net lease of 30 years with an option to extend for Telstra. The site is near to the telcos main operations site, and remains key to their service while Centuria were talking up their new partnership with Telstra, providing an opportunity to offer more space across the portfolio. CIP also acquired two smaller assets – a $16.4m industrial facility in NSW and a $14m distribution centre in the outskirts of Melbourne. The raise at $3.15/share is a 4.8% discount to last close, a tight margin but it also represents a 11.7% premium to NTA.

Alongside the raise, CIP announced their full year result with FFO per unit at 18.9c and distributions of 18.7c for the year in line with guidance, albeit at the lower end. The book is currently 97.8% occupied with WALE of 7.2yrs and geared at 27.2%. Rent collections for the hairy last quarter came in at 97% with nearly all tenants operating through the period. Valuation for the portfolio grew in the period despite the headwinds to asset values. CIP guided to 17.4c FFO per unit for the year ahead and 17c to be distributed representing a 5.1% yield on last close.

Centuria Industrial REIT (CIP) Chart

BROKER MOVES:

* Village Roadshow Cut to Neutral at Citi; PT A$2.32
* Monadelphous Cut to Neutral at UBS; PT A$8.45
* Tabcorp Cut to Neutral at Macquarie; PT A$4
* Monadelphous Cut to Market-Weight at Wilsons; PT A$8.40
* United Malt Rated New Buy at Jefferies; PT A$4.80
* St Barbara Raised to Overweight at JPMorgan; PT A$3.80
* IGO Raised to Overweight at JPMorgan; PT A$5.60
* Saracen Mineral Cut to Underweight at JPMorgan; PTA$4.90
* Incitec Raised to Add at Morgans Financial Limited; PTA$2.35

OUR CALLS

No changes today

Major Movers Today

Have a great night

James, Harry & the Market Matters Team

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