Charter Hall Group (CHC)
BUY

Growing Funds

 20 Feb 2023
Sector: Financials

1H23 RESULT

Need To Know

  • In-line result. Guidance re-iterated. 
  • Funds under management increased +10% in 1H23. 
  • We reaffirm our Buy rating

Result Highlights

Statutory Profit $227m vs A$222 market. 

Strong group FUM at +10% in 1H23.

Operating EPS of 50.7cps in-line with market.

DPS 20.8cps in-line with market.

NTAps increased 4.4% due to the addition of new assets.

Re-iterated FY23 guidance.

Gearing increased. Balance sheet was gearing up 3% (look- through was up 7%) and gearing on funds increased 3.5%. 

Investment Thesis

In-line result with FY23 guidance re-affirmed. The group saw strong funds under management (FUM) growth for the period, increasing A$8.1bn to A$88bn. 

Capitalisation rates remained largely flat across all areas of the business and NTA increased by +4.4% due to an increase in the asset base.

Re-iterated guidance: 

  1. Operating earnings of no less than 90cps. Consensus is at 95cps (remembering they did 50.7cps 1H23)
  2. 6% growth in FY23 DPS, in-line with consensus.

Gearing’s impact on funds growth was the biggest area of question out of the result. Gearing on funds increased 3.5% on a flat asset valuation base which has the market hesitant towards CHC’s ability to grow AUM for 2H23. 

Our view is that CHC will meet FY23 guidance given the strong funds growth in 1H. CHC’s share price had a strong run into the result is getting punished for not guiding toward stronger growth for 2H23 (like the market was expecting) albeit all signs still suggest guidance will be met. 

We re-affirm our longer-term view that CHC will continue to benefit from higher base fees on a larger FUM base. CHC still trades below its long-term average PER of 17x which is likely to be magnified by today’s price action. 

We rate CHC a Buy.

Figure 1: CHC PER Trading just below long-term average.

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Stock Overview

Share Price

Company Overview

CHC is a property investment management company focused on investing in office, industrial, and retail portfolios. CHC operates through three segments: Property investments, Development investments, and Funds management.

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