Aventus Group

A Quick Look on Distribution Reinvestment Plan (DRP) – Underwriting Agreement: Aventus Group (ASX: AVN) comprises Aventus Holdings Limited and Aventus Capital Limited as the responsible entity for Aventus Retail Property Fund. The market capitalisation of the group stood at ~$1.29 Bn as of 12 July 2019. On June 24, 2019, Aventus Group had made an announcement that it would be paying the distribution amounting to 4.18 cents per stapled security with respect to the quarter ending June 30, 2019. The company also added that the intended distribution payment date is August 30, 2019. Additionally, the company made an announcement that it had entered into an underwriting agreement with Macquarie Capital (Australia) Limited on July 1 2019 to act as the sole underwriter of an offer of stapled securities in the group under AVN’sDRP.

The release stated that Macquarie would be underwriting entire DRP Offer up to around $22.5 million at the DRP Underwritten Price which would be calculated using average of the 10 daily volume weighted average prices for all sales of Stapled Securities sold on Australian Securities Exchange over the 10 Trading Days of the Pricing Period, less the discount of 2%. AVN also announced that preliminary revaluation of the portfolio of large format retail centres as at June 30, 2019 had led to the modest increase of $40 million. The following picture provides a broad overview of the same:


Investment Property Portfolio Valuation (Source: Company Reports)

What to Expect From AVN: In the 1H FY19 results presentation, the company stated that its strategy revolves around driving the sustainable earnings from the portfolio. Additionally, in another update, the company stated that the proceeds from the stapled securities issued in connection with DRP Offer would be utilised towards the financing of projects in the FY20 development pipeline.

Stock Recommendation: Talking about the key financial ratios, EBITDA margin stood at 65% in 1H FY 2019, which is higher than the industry median of 62.2%. However, its gross margin stood at 78.4% in 1H FY 2019 as compared to the industry median of 74.1%. Considering these ratios, it looks like that the company is having decent financials. The annual dividend yield of the stock as per ASX stood at 7.02%. The company’s stock has delivered the return of 4.35% in the past one month while, in the past three months, the stock’s return was 5.73%. Currently, the stock is trading towards a 52-week high price of $2.510 with PE multiple of 9.590x. Hence, considering the above-stated factors and current trading level, we give a “Hold” rating on the stock at the current market price of A$2.360 per share (down 1.667% on 12 July 2019).
 

National Storage REIT

Announcement About Security Purchase Plan: National Storage REIT (ASX: NSR) had made an announcement that it is offering eligible securityholders the opportunity to participate in the security purchase plan, allowing them to contribute up to A$15,000 in applying for the fully paid ordinary stapled securities in National Storage REIT. It was added that the purpose of the SPP and the placement revolves around reducing the existing debt so as to provide the company with financial flexibility in order to pursue acquisition opportunities or other actions in line with NSR’s stated business strategy.

Completion of Institutional Placement: In another update, National Storage REIT made an announcement that it had wrapped up the fully underwritten placement to the institutional and professional investors of 99,415,205 new ordinary stapled securities, which involved the price of $1.71 per stapled security garnering $170 million. The issue price reflects the 4.4% discount to distribution-adjusted last closing price of NSR stapled securities on June 24, 2019. The company had stated that it is having a proven track record of delivering the robust total returns for the securityholders of NSR.


Total Security Holder Returns Since IPO (Annualised) (Source: Company Reports)

What to Expect From NSR: The company stated that it is expecting FY19 earnings of 9.6 cents per stapled security, which is within the guidance range. The current ratio of the company stood at 1.46x in 1H FY 2019, which is higher than the industry median of 0.49x, showing a decent liquidity position to meets its short-term obligation as compared to the border industry. Also, it can be said that, as a result of decent liquidity levels, it can make deployments towards the key strategic operational activities moving forward.

Stock Recommendation: Coming to the analysis part, net margin stood at 35.7% in 1HFY19. However, its EBITDA margin stood at 56.6% in 1H FY 2019, which implies a rise of 2.6% on the YoY basis which can be considered at decent levels. Debt/Equity ratio stood at 8.27x in 1H FY 2019, which implies a fall of 14.1% on the YoY basis and, thus, it can be said that the company has deleveraged its balance sheet. This can be considered as the positive factor which might help the company in stabilizing its balance sheet position.

The company’s stock has delivered the return of 2.88% in three months while, in the span of the previous six months, the return stood at 1.13% which can be considered at respectable levels. Currently, the stock is trading slightly below the average of 52 weeks high and low levels of $1.753 with PE multiple of 92.670x and an annual dividend yield of 5.42%. Hence, considering the above-stated facts and current trading level, we give a “Hold” recommendation on the stock at the current market price of A$1.770 per share (down 0.84% on 12 July 2019).  

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