New CEO's challenge
1H23 RESULT
Need To Know
- FFOps and DPS in-line.
- NTA fell ~2% due to cap rate expansion
- Re-iterate Buy rating
Result Highlights
FFOps of 32.4cps and DPS 25cps are in-line.
Net Tangible Assets (NTA) fell ~2% to A$5.98 due to expanding cap rates (office saw a 5% fall in valuation).
Gearing of 28.5% is flat on FY21.
Office occupancy weak at 87.9%, down from 92% in 1H22.
FFO guidance is no worse than consensus and may in fact imply a very small upgrade (<1%), DPS guidance is inline.
Investment Thesis
Earnings are largely in-line. FY23 guidance sits in-line with consensus estimates suggesting we are unlikely to see revisions off the back of the result.
Office remains the weakest segment with cap rate expansion driving a 5% decrease in valuation. Office Occupancy of 87.9% is well below what we have seen from industry peers.
The balance sheet remains in a strong position with A$1.1bn of liquidity and gearing sitting at the lower end of the target 25-35% range (28.5%).
CEO Bob Johnston, 10 days ago, announced his intention to retire by the end of this calendar year. This puts GPT in a similar position to number of other AREITs that are looking for CEOs following departures over the past 6 months. The new CEO will likely focus on closing the disconnect between share price and NTAps.
GPT operates a strong diversified portfolio across retail, office, and logistics. Operationally the group are continuing to perform well, and the funds management segment is continuing to ramp up.
At an NTAps of A$5.98, the share price implies a ~22% discount which in our view is not representative of the Group’s longer term growth potential.
We re-affirm our Buy rating.
Stock Overview
Share Price
Company Overview
The GPT Group is an Australia-based vertically integrated diversified property company that owns and manages Australian office, logistics and retail assets.
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