Company Reports

No-moat Charter Hall Retail REIT announced the sale of Rutherford Mall in New South Wales for AUD 50 million. The sale price was slightly above the December 2023 book value, consistent with our view that retail REITs contain gearing by selling assets. Smaller retail sites have been one of the few pockets of commercial property in Australia that maintain their valuations and remain liquid. The Rutherford Mall sale continues a pattern of recent disposals from retail REITs Vicinity Centres, Charter Hall Long WALE REIT, and Region Group. All have sold smaller retail sites near book values, and, in some cases, above book values.

Charter Hall Retail REIT owns or partially owns an Australian portfolio of about 50 convenience-focused shopping centres, and several hundred service stations leased to BP, and Ampol in Australia, Gull in New Zealand. More than half of rent comes from tenants we view as unlikely to ever miss rental payments.

Charter Hall Retail REIT is on track to meet guidance and our full-year operating earnings per unit estimate of AUD 27.4 cents with AUD 13.5 cents per unit delivered in the first half. We expect modest earnings declines for the next few years given rising debt costs. But once debt costs peak, which we expect around 2027, revenue growth should again translate to earnings growth. Charter Hall Retail REIT’s 4.3% cost of debt is not far below our long-term estimated cost of debt of 6.5%, so we think a fair bit of pain has already been taken.

Charter Hall Retail REIT owns or partially owns an Australian portfolio of about 50 convenience-focused shopping centres, and several hundred service stations leased to BP, and Ampol in Australia, Gull in New Zealand. More than half of rent comes from tenants we view as unlikely to ever miss rental payments.

The federal government’s migration review was released on Dec. 11 and it suggests high population growth remains the status quo. The review tinkers with various visa rules, but contains no major reduction in migrant numbers, suggesting high migration will persist, relative to precoronavirus levels and versus other developed countries.

Charter Hall Retail REIT owns or partially owns an Australian portfolio of about 50 convenience-focused shopping centres, and several hundred service stations leased to BP, and Ampol in Australia, Gull in New Zealand. More than half of rent comes from tenants we view as unlikely to ever miss rental payments.

Charter Hall Retail REIT owns or partially owns an Australian portfolio of about 50 convenience-focused shopping centres, and several hundred service stations leased to BP, and Ampol in Australia, Gull in New Zealand. More than half of rent comes from tenants we view as unlikely to ever miss rental payments.

No-moat Charter Hall Retail REIT’s fiscal 2023 earnings were marginally below our expectations and guidance for fiscal 2024 was marginally ahead by a similar amount. Our fair value estimate rises 4% to AUD 4.30 due to the time value of money. Operating earnings per security, rose 1.1% to AUD 28.7 cents per security, and distributions were up 5.3% to AUD 25.8 cents. Management guidance is for operating earnings to decline in fiscal 2024 to AUD 27.4 cents per security. We assume a distribution of AUD 25.5 cents per security, around the midpoint of guidance of a 90%-95% payout ratio.

No-moat rated Charter Hall Retail REIT reported December-half operating earnings of AUD 14.22 cents per security, up 8% from the first half of fiscal 2021. Operating earnings are on track to meet our unchanged, full year forecast of AUD 28.6 cents per security, which is in line with increased guidance of at least AUD 28.4 cents per security (up from AUD 28.2 cents). We lift our distribution estimate to AUD 24.5 cents per security, which matches increased guidance.

No-moat Charter Hall Retail REIT’s fiscal 2021 operating earnings per security were 4% below our expectations at AUD 27.30 cents. But we maintain our long-term assumptions and AUD 3.85 fair value estimate, which sees the stock screen as fairly valued. The REIT announced a final distribution of AUD 12.70 cents per security, taking full year distributions to AUD 23.40 cps.

Following no-moat Charter Hall Retail REIT’s first-half results, we make no change to our fiscal 2021 estimates of a distribution of 23.5 cents and operating earnings of 28.5 cents. Our estimates are marginally above guidance provided by management at its results on Feb.15. While our long-term expectations are unchanged, we increase our fair value estimate by 1% to AUD 3.85, due to time value of money.

Charter Hall Retail REIT owns or partially owns an Australian portfolio of roughly 50 convenience-focused shopping centres, 225 service stations leased to BP Australia, and a distribution centre leased to Coles. About 55% of income comes from tenants we view as unlikely to miss a rent payment. We expect this portion to surpass 60% of the portfolio in fiscal 2022, due to acquisitions, divestments, and developments that will increase the REIT’s exposure to defensive tenants including Woolworths, Coles, Aldi, and BP.

Charter Hall Retail REIT owns or partially owns an Australian portfolio of roughly 50 convenience-focused shopping centres, 225 service stations leased to BP Australia, and a distribution centre leased to Coles. About 55% of income comes from tenants we view as unlikely to miss a rent payment. We expect this portion to surpass 60% of the portfolio by the end of fiscal 2021, due to acquisitions, divestments, and developments that will increase the REIT’s exposure to defensive tenants including Woolworths, Coles, Aldi, and BP.

Charter Hall Retail REIT delivered a reasonable result given the headwinds, about in line with our expectations. However, we are placing the stock under review to take a closer look at the evolution of its portfolio. Over the last few years the group has reduced its weight to regional areas and increased exposure to metropolitan areas. It has also acquired service station assets, and recently, supermarket logistics assets. It remains a convenience-focused retail REIT, but we plan to take look at the nuances of this evolved portfolio. We plan to republish on Charter Hall Retail REIT within the next three business days.

No-moat Charter Hall Retail REIT has raised AUD 275 million of equity via an institutional placement at AUD 2.90, and plans to raise up to an additional AUD 25 million via a retail unit purchase plan, or UPP, at the same price. We recommend investors subscribe to the UPP, providing it is consistent with individual investing goals.

We reduce our fair value estimate for no-moat Charter Hall Retail REIT to AUD 3.80 from AUD 4.20 due to coronavirus-driven spending cuts.

Charter Retail REIT increased its earnings per unit guidance for the full year due to solid underlying operating performance in the first half, and due to acquisitions. We marginally increase our estimated growth in operating earnings per share to 2.3% for the full fiscal year, in line with the new guidance, up from 2.2%. However, we make no change to our fair value estimate of AUD 4.20. Despite raising our earnings estimates for fiscal 2020, in part due to earnings accretion from these purchases, this is offset by the acquisition prices slightly detracting from our valuation. We estimate that the earnings yields on offer are below the group’s long-term cost of capital.

No-moat-rated Charter Hall Retail REIT has announced it will acquire a partial stake in a portfolio of 225 service stations and associated convenience stores. Service station-focused convenience stores are a new focus for the group, but we don’t view this as transforming the business.

No-moat-rated Charter Hall Retail REIT, or Charter Hall Retail, delivered a decent result that was in line with our expectations. We have maintained our forecasts and fair value estimate at 4.20 per unit. The stock remains fairly valued.

We have maintained our no-moat, Standard stewardship, and medium fair value uncertainty ratings for Charter Hall Retail REIT following the transfer of coverage to a new analyst. We have also maintained our AUD 4.20 fair value estimate and, at the current market price of AUD 4.57, continue to believe the units are overvalued. Our fair value implies a fiscal 2019 P/E ratio of 14 and a distribution yield of 6.8%, versus a market price-based P/E ratio of 15 and yield of 6.2%. As a non-tax-paying trust, distributions are unfranked. Our forecasts assume an EPS CAGR of just 1.0% over the next decade, with only inflation like annual rental growth of around 2%, offset somewhat by rising interest costs.