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Kalkine Daily 16/02/2015 + BWP Trust

Feb 15, 2015

| Read Time :10 Mins

In today’s daily we have covered stock research on BWP Trust (EXPENSIVE).

The S&P 500 was up by 8.51 points or 0.41% to 2096.99 on Friday. The S&P 500 index closed at a record high on Friday, as energy shares gained with oil prices, while the Nasdaq composite index hit a 15-year high helped by technology stocks. Equities rallied this week after a ceasefire agreement between Ukraine and Russia and apparent progress toward a deal on Greek debt. The Nasdaq had the strongest gains of the three main indexes on Friday. A strong report by Cisco Systems Inc earlier in the week led some investors to conclude that technology demand is improving.

The S&P energy sector closed up 1.95 percent as oil topped $60 for the first time in 2015 despite persistent worries about oversupply. American Express weighed on the S&P index with a 3 percent decline. Several brokerages slashed price targets for the company after Costco said it would stop accepting its card in its U.S. stores. The recent bounce back in the price of Brent appears to have been driven by the sharp drop in the number of US rigs drilling for oil and the slew of announcements from major oil companies that they are cutting back on investment.

Cisco Daily Chart (Source – Thomson Reuters)

S&P ASX 200 was up by 133.9 points or 2.33% on Friday and closed at 5877.5 points. Rio Tinto gained 6.5 per cent on Friday to close at $63.79 after announcing late on Thursday a $US 2 billion share buyback program and declaring a 12 per cent higher final dividend despite a 9 per cent dip in earnings. A further recovery in the oil price buoyed the mood, with Brent crude up 3.6 per cent over the week to $US57.25 per barrel, driving Australia's biggest oil producer Woodside Petroleum to gain 4.0 per cent.

Commonwealth Bank of Australia rose 2.2 per cent on Friday to $93.15. Westpac Banking was up 2.3 per cent on Friday at $37.53 and Australia and New Zealand Banking Group up 2.3 per cent at $37.53, with both finishing at all-time highs. National Australia Bank was up 2.1 per cent on Friday at $37.48. Newcrest Mining lost 2.3 per cent this week to finish at $13.90 after posting on Friday a slightly weaker than expected first-half profit of $200 million.

Rio Tinto Daily Chart (Source – Thomson Reuters)

Top Performers on the ASX 200 were :-

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Stock of the Day - BWP Trust (Expensive)

In the latest half year results released to 31^st December 2014, Major investment themes have been large format retailing property ownership, home improvement/Bunnings focus, emphasis on asset selection and a strong balance sheet. Drivers of returns have been rental growth, acquisitions & reinvestment along with cost of funding. Long term value creation has been due to proactive management of existing assets, portfolio growth and effective management of the Trust.

Total Return Profile (Source - Company Reports)

BWP Trust is an externally managed Australian Real Estate Investment Trust (AREIT) that owns 82 bulky goods retail properties across Australia. 93% of BWP’s rental income is derived from the tenant Bunnings Group Limited, which is the reialing retailer of hardware and home improvement products in Australia and is 100% owned by Wesfarmers. BWP is managed by BWP Management Limited which is solely owned by Wesfarmers who also own 24.7% of the issued units in BWP.

Financial Highlights (Source - Company Reports)

BWP’s income is relatively low risk with moderate growth. Its leases generally range from 10-15 years with the option for five year renewals. It’s WALE (weighted average lease expiry) is 6.9 years and rents grow annually with either CPI, a fixed growth rate or periodic market rent reviews. The portfolio is diversified by the number of assets (82 in total at June 2014) and by geography (split: 20% NSW, 32% VIC, 26% QLD and 17% WA, 2% ACT and 3% SA).

BWP Trust Daily Chart (Source - Thomson Reuters)

In view of the recent result reported there was a 19.1% increase in revenue from acquisitions, rent reviews and developments. Like for like rental growth of 2.7% for 12 months to 31^stDecember 2014. BWP completed the development of 3 Bunnings Warehouse stores. Bunnings Warehouses are high quality real estate and attractive assets to own on the back of their strong lease covenants and full occupancy. We believe the stock is expensive at the current price and would review the stock at a later date.

Team Kalkine

Level 13 167 Macquarie Street
Sydney NSW 2000 Australia
E-Mail - [email protected]
Phone - 02 8667 3147

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