Stocks’ Details
 

Charter Hall Retail REIT

Equity Raising to Strengthen Balance Sheet: Charter Hall Retail REIT (ASX: CQR) makes investment in supermarkets and shopping centres in Australia. The market capitalisation of the company stood at $1.47 Bn as on 27^th April 2020. Recently, Charter Hall Retail Management Limited, as responsible entity of Charter Hall Retail REIT, announced that it is going to raise $275 million through a fully underwritten institutional placement. Additionally, it will also raise up to $25 million via a non-underwritten Unit Purchase Plan to eligible unitholders in ANZ. The company would utilise the proceeds to cement its balance sheet and provide financial flexibility in order to enable continued execution of strategy. Post equity raising, the company expect its balance sheet gearing to decline by 22.6%, and cash and undrawn debt facilities are anticipated to increase to $407 million.


Source and Uses of Funds (Source: Company Reports)

Suspension of Guidance: Due to uncertainty from the COVID-19 pandemic, the company has suspended its guidance for FY20. The company is intending to pay a distribution for 2H FY20 considering the operating cashflow generated during the period.

Decent Growth in Key Margins: Net margin of the company stood at 62.5% in 1H FY20, reflecting YoY growth of 7.3%. This implies that the company has improved its capability to convert its top-line into bottom-line. Current ratio of CQR stood at 0.94x versus 0.52x of the industry median. This indicates that CQR is well positioned to pay its short-term obligations. During the span of one month, the stock has provided a return of 6.42%. The stock will remain in trading halt until the announcement is released to the market or 29 April 2020, whichever is earlier. The stock last traded at the market price of $3.150 per share.

ALE Property Group

Entered Debt Facility to Refinance all FY21 Debt Maturities: ALE Property Group (ASX: LEP) is the owner and landlord of the strategic property leased to quality tenants. The market capitalisation of the company stood at $808.53 Mn as on 27^th April 2020. Recently, the company entered into a new debt facility amounting to $250 million with a term of up to two years with opening credit margin of 1.75% and incremental increases of 0.75% every six months. The company will use the proceeds of the new debt facility for repaying AMTN debt amounting to $225 million with a maturity date of 20 August 2020 and $20 million short term debt facility. The company’s FY20 interest expense, after hedging, is anticipated to be in line with FY19 at $22.2 million, post drawdown of the new debt facility and repayment of the AMTN and bank debt facility. The below picture provides an overview of financial performance for 1H FY20:


1H FY20 Performance (Source: Company Reports)

Plans for Future Refinancing: Going forward, the company would continue to observe market conditions with the intention of refinancing the new debt facility.

Stock Recommendation: EBITDA margin and operating margin of the company stood at 86.2% and 86%, indicating YoY growth of 3.0% and 2.9%, respectively.LEP has EV/Sales multiple of 22.5x as compared to the industry average (Real Estate Operations) of 13.1x on TTM basis. The stock of LEP is trading at a premium P/E multiple of 19.46x against the industry average (Real Estate Operations) of 13.1x. It looks like the stock is overvalued at current trading levels. During the span of three months and six months, the stock of LEP has witnessed corrections of 27.42% and -21.78%, respectively. Based on the above-stated factors, we have a watch stance on the stock at the current market price of $4.140 per share, up by 0.242% on 27^th April 2020.

National Storage REIT

Self-Storage Classified as an Essential Service: National Storage REIT (ASX: NSR) is engaged in the management and operations of self-storage centres. The market capitalisation of the company stood at $1.32 Bn as on 27^th April 2020. The company has recently stated that all 182 NSR centres throughout Australia and New Zealand were open and operational across the COVID-19 pandemic. It added that the storage revenues continue to reflect the resilient nature of the self-storage asset class to economic volatility. Moreover, during the Level 4 lockdown restrictions in New Zealand, self-storage was classified as an essential service. National Storage REIT has executed numerous costs saving and capital expenditure deferral initiatives throughout its business. The below picture gives an overview of profit & loss for 1H FY20:


Profit & Loss (Source: Company Reports)

Revised Earnings Guidance: The company has revised its earnings guidance for FY20 in the range of 8.5cps - 9.0cps. The acquisition and development pipeline of the company is solid.

Valuation Methodology: P/BV Multiple Based Relative Valuation

P/BV Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months
Stock Recommendation: Return on equity of the company stood at 19.3% against the industry median of 4.7%. Current ratio of NSR stood at 0.57x in 1H FY20 as compared to the industry median of 0.52x, reflecting decent liquidity position of the company. The stock of NSR has corrected 22.92% and 9.02%, during the time period of three months and six months, respectively. We have valued the stock using P/BV based illustrative relative valuation method and arrived at a target price with limited upside. Hence, in light of above-mentioned facts, vlaution and current trading levels, we have a watch stance on the stock at the current market price of $1.675 per share, up by 0.601% on 27^th April 2020. 

 
Comparative Price Chart (Source: Thomson Reuters)

Disclaimer

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.