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Highlights

  • The S&P/ASX 200 A-REIT (XPJ) index, which intends to mirror the performance of ASX-listed REITs, is down nearly 11% in the last one year, underperforming the ASX 200 benchmark index.
  • Charter Hall Group (ASX: CHC) shares are down nearly 28% in the last one year.

Rising interest rates have weighed on the performance of ASX-listed Real Estate Investment Trusts (REITs) shares. The S&P/ASX 200 A-REIT (XPJ) index, which intends to mirror the performance of ASX-listed REITs, is down nearly 11% in the last one year compared to less than one per cent decline in the broader S&P/ASX 200 (XJO) index.

Despite the underlying business doing well, many REIT stocks have failed to deliver the desired return in the last one year. One such stock is Charter Hall Group (ASX: CHC), which is down nearly 28% in the last one year. Let's delve deeper into this REIT stock to understand how the underlying business performs.

CHC Financial performance

As of 31 December 2022, the group's funds under management (FUM) stood at AUD 88 billion, almost the same as the FUM on 31 December 2021. During the half-year ended 31 December 2022, property investment portfolio value of the company rose by AUD 126mn to AUD 3.0bn, generating a total property return of 10.4%. Further, the property FUM increased by 11.2% annually, driven by net acquisitions and positive revaluations.

Total segment revenue in the first half of FY23 stood at AUD 401 million, 5.8% lower than AUD 425.6 million reported in pcp. Despite the drop in its revenue, its profitability metrics improved; gross margin increased to 73.9% in 1HFY23 from 68.4% in 1HFY22.

Despite a growing underlying portfolio, CHC managed to reduce its leverage ratio. Debt-to-Equity ratio of the company decreased to 0.14x in 1HFY23 versus 0.21x in 1HFY22.

The company continued its development activities to drive asset creation and enhance returns to attract new capital to its funds. CHC's development completions in the twelve months through 31 December 2022 stood at AUD 2.0 billion. During 1HFY23, its portfolio occupancy stood at 97.4%, the Weighted Average Lease Expiry (WALE) remained at 7.7 years, whereas the Weighted Average Rent Review (WARR) was at 3.7%.

High Institutional Ownership

Looking at the ownership structure of CHC, the top 10 shareholders in the company are institutional investors, and they together hold more than a third of the shares in the company. This shows the confidence of institutional investors, who do thorough research before putting their money in any company.

CHC Share Price Performance

On Tuesday, 2 May 2023, CHC shares ended 3.56% lower at AUD 10.83 after the Reserve Bank of Australia decided to hike the cash rate by another 25 basis points to 3.85%, going against the broader market expectation. With today's fall, CHC shares are now down 27.55% in the last one year, and the stock is just 3.14% away from its 52-week low of AUD 10.50 seen on 17 June 2022.

CHC Daily Price Chart sourced from REFINITIV

Note 1: Past performance is neither an Indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, is 2 May 2023. The reference data in this report has been partly sourced from REFINITIV.