In-line. Improving office occupancy
RESULTS
Need To Know
- In-line result. Marginal miss on FFOps, DPS in-line. Guidance unchanged.
- Signs of office occupancy improving (up 0.5%), on target to reach the above +90% target.
- We expect that the improving operating conditions and discounted multiple will benefit the GPT share price into year end.
1H23 Result overview:
FFOps of 16.5cps vs ~17cps consensus.
DPS 12.5cps in-line.
Gearing 28.1% vs 28.5% at FY22.
NTAps at $5.85 (down 2.2% vs FY22), implies a ~29% discount to share price.
Portfolio occupancy at 97.9%. Office occupancy at 88.5% (up 0.5%).
No change to FY23 guidance: FFOps of 31.3cps and DPS of 25cps.
Highlights
In-line result. Earnings appears to be improving in all segments except office. Retail and logistics benefit from strong rental reviews and high occupancy. Office yet to full recover from COVID although is trending in the right direction.
The balance sheet appears to be in a good position with gearing down to 28.1% (from ~28.5%) – within 25-35% target range. Liquidity increased to $1.5bn (vs $1.1bn FY22). Hedging was increased and lengthened to 72% over the next 3.5yrs (up from 61% over 3 years).
Office occupancy saw a +0.5% increase despite the group flagging difficult (but improving) operating conditions. This continues to push office occupancy closer to the groups above 90% target for FY23.
Retail flagged as in “better shape” than pre-COVID. Slowing consumer demand not expected to have a dramatic impact given all contracts have fixed rental increases (not turnover based). Management remain optimistic around a soft landing for Australia's retail conditions.
Investment Implications
GPT appears cheap at a price to NTA discount (P/NTA) of ~29% and a PER of 13.5x (a 1SD discount to its long term average). We expect that given the in-line result, hint of improving office occupancies and discount to NTA, the share price will be rewarded off the back of the result.
We re-affirm our Buy rating.
Figure: GPT trades at the second largest discount to NTA of the AREITs
Stock Overview
Share Price
Company Overview
The GPT Group is an Australia-based vertically integrated diversified property company that owns and manages a portfolio of Australian office, logistics and retail assets.
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