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Investor's Guide to Charter Hall Group

Aug 24, 2015 | Team Kalkine
Investor's Guide to Charter Hall Group

Charter Hall Group
 
  • Since its inception in 1991, the group has grown to become one of Australia’s leading property groups, with a total property portfolio of  $11.5 billion.On behalf of its institutional, wholesale and retail investors, it owns and manages a large range of quality commercial properties consisting of office buildings, supermarket-anchored retail centres, and a rapidly growing portfolio of industrial assets.it delivers sustainable returns for investors, and positive experiences for tenants and the community, because of a uniquely integrated business model and a team with considerable experience.As a Group,. Charter Hall Group is a stapled security: Charter Hall Limited (CHL) is the operating business, while Charter Hall Property Trust (CHPT) co-invests in the funds and partnerships the Group manages.
       
       Charter Hall Daily Chart (Source - Thomson Reuters)

  • The group announced its results for FY 2015 and the key financial results were statutory profit of $ 162.5 million, operating earnings of $ 110.8 million working out to 29.7 cents per unit and distributions of $ 102.9 million amounting to 27.5 cents per unit which represents a payout ratio of 92.6%. The look through gearing is 33.6% and the portfolio value of $ 2.16 billion grew by 8.7% over the period. Net tangible assets per unit grew by 5.6% to $ 3.59 and the completion of the debt restructuring increased the maturity of the weighted average debt to 5.8 years and the cash and debt capacity is $ 142 million. Moody's has currently assigned a Baa1 rating to this REIT.

  • The portfolio operating performance shows growth in same property net operating income of 2.4% and speciality rent growth of 1.5% from 122 renewals and 185 new leasing transactions. Occupancy is 98.4%, the weighted average anchor lease duration is 10.7 years and 15 anchor lease deals were completed during the year including the first transaction with Aldi Supermarkets. Active management of the portfolio is a key focus for the group and, during the year, occupancy has continued to be stable at 98.4% despite the continuing trend of softer lease conditions. The portfolio WALE is 7 years and speciality MAT growth increased to 2.8% continuing the positive momentum for speciality tenants in the portfolio. Supermarket MAT growth was 1% reflecting the more subdued market conditions for supermarket tenants. Portfolio property valuations increased by $ 86.7 million or 4.2% with total weighted average cap rates continuing to hold firm demonstrating the strong investor interest in this asset class. Anchor tenant leases from Woolworths and Wesfarmers continue to provide 52% of the annual base rent and the anchor WALE is 10.7 years.

  • In keeping with its disciplined investment strategy, the group is continuing to focus on recycling from non-core properties to larger, higher growth potential properties. During the year, the group acquired two supermarket anchored shopping centres for a total consideration of $ 97.1 million as an average initial yield of 7.2%. Coomera City Centre Queensland and Brickworks Marketplace South Australia are both located in high growth corridors and meet the investment criteria of the group. Two major redevelopments at Caboolture Square Queensland and Lansell Square Victoria were completed and Lansell is trading according to expectations and has been 95.5% leased. Caboolture is taking longer to lease than had been originally anticipated because of the delay in the completion of the refurbishment. The sale of a number of non-core retail properties has been completed for a combined sale price of $ 37.6 million and a yield of 8.2%. These include three properties in Central Western New South Wales and the sale price of $ 21.6 million reflects a premium of 3.5% to the book value as on June 2014. The net proceeds were utilised to retire CMBS notes of $ 18.5 million and the balance used to pay down roughly $ 2.6 million of the revolving bank debt facility. The sale of Windsor Marketplace in New South Wales was completed in June and, as a result of these transactions and the pipeline for redevelopment, the average asset value has increased from $ 28.6 million at June 2014 to $ 32.7 million at June 2015.

  • Conservative capital management has resulted in the weighted average debt maturity increasing from 3.7 years to 5.8 years after the completion of several significant initiatives to restructure the debt funding platform. USD $ 200 million was raised from a US private placement issuance with a duration of 12 years and a fixed USD coupon of 3.55% which is completely hedged in Australian dollars for both principal and interest and represents a margin of 184 basis points over BBSW. The transition to a totally unsecured debt facility is expected to be completed by 28 September 2015. The restructured syndicated bank debt facility now has tranches of 18 months ($ 150 million), 3 years ($ 150 million) and 5 years ($ 285 million) for a total facility of $ 585 million compared to the earlier figure of $ 535 million. The existing CMBS facility will remain in place until 28 September 2015 and will be repaid from the proceeds of the US private placement issuance.

  • The group also announced that it had contracted to acquire 2 high-quality sub regional shopping centres in New South Wales and the Northern Territory. This is in accordance with the strategy to acquire shopping centres anchored by supermarkets with high potential for income and capital growth and this portfolio consists of Goulburn Plaza New South Wales and Katherine Central in the Northern Territory. The combined acquisition price is $ 94.9 million or $ 102 million including acquisition costs with an initial yield of 7.2%. The acquisition will be funded by a fully underwritten institutional placement at an offer price of $ 4.02 per unit, net proceeds from the sale of non-core assets and debt funding of $ 31 million. The transaction is expected to be accretive from FY 2017 onwards because of the growth potential of the acquisition.

  • The guidance for FY 2016 is operating earnings in the range of 30.25 and 30.75 cents per unit and the distribution payout should remain between 90% and 95%. This is a modest growth in earnings and we believe that the current share price makes the stock expensive. We would not recommend an investment at this point in time.
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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 currently hold positions in:  BHP, BKY, KCN, PDN, and RIO. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.
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