Waypoint REIT (WPR) $2.25

WPR owns a portfolio of Fuel & Convenience assets valued at +$2.7bn across +400 properties. The key tenant is Viva Energy (VEA), which operates around 1300 Shell and Liberty branded outlets, supplying 25% of Australia’s fuel. WPR owns the underlying properties, structured as a Real Estate Investment Trust (REIT), and is expected to pay a yield above 7% for the coming 12 months. While some property companies have enjoyed a stellar FY24, with the local real-estate sector up over 20%, WPR has not, with the stock languishing near the bottom of its 52-week trading range.

While higher bond yields are a key negative influence on this real-estate owner, around 96% of their income is sourced from the one tenant, VEA, and there remains some uncertainty around what increasing EV penetration and the impact this will have on fuel retailing will mean for companies like Viva. As we covered in a question on Saturday around Ampol (ALD), we ultimately think the outlook for EVs could reduce the value of service stations. They rely heavily on foot traffic to sell other stuff, and our lingering concern is that less foot traffic, as EVs can essentially be ‘fueled up’ at home, will continue to have a negative impact on the sector, which will need to reinvent itself.

WPR recently reiterated guidance, though they are looking to offload some assets and it seems buyers have been spooked by uncertainty around interest rates.  Higher interest rates for longer flow into higher costs of capital which will likely weigh on property values further. While their balance sheet is solid (gearing at ~33%), and their NTA is estimated at ~$2.50, down from $2.71 in December 2023, we simply think there are too many variables in WPR at this stage.

• While we view WPR as a solid operator, paying a high yield, the uncertainty around service station values in the years ahead has us more cautious, preferring other property stocks (BWP, for example).