ALE Property Group

LEP Details

Received Acquisition Proposal: ALE Property Group (ASX: LEP) is a real estate property trust that owns a large portfolio of freehold pub properties. LEP recently received a proposal from a consortium managed by Charter Hall Group (ASX: CHC), comprising Charter Hall Long WALE REIT (ASX:CLW) and Hostplus (together, the Charter Hall Consortium), to acquire 100% of LEP securities by way of a company scheme of arrangement and a trust scheme (the Schemes).

• Based on CLW’s closing security price of $4.92 on 30 July 2021, the security holders of LEP will receive $5.683 per LEP security comprising $3.673 cash per LEP security and 0.408 CLW securities per LEP security.
• It is expected that the scheme will be implemented in December 2021. The record and implementation date are in mid-December 2021.
• The Board of LEP is of the view that the proposal is in the best interests of LEP securityholders and recommended its securityholders to vote in favour of the Schemes.

FY21 Results Highlights: For the year ended 30 June 2021, ALE reported distributable income of $34.4 million, up 13% on the previous year, due to the increase in CPI rental income, backdated rental increases from 2018 on 36 properties and lower finance costs. Statutory profit for FY21 stood at $179.2 million, up by $159.2 million, driven by net property valuation gains ($141.3 million), higher distributable earnings ($4.0 million), profits on sale of properties ($4.2 million), and lower derivative movements.

Net Income Trend (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to the risks related to the property valuations, which could impact its results. Further, the company is also exposed to the risks related to the associated restrictions of COVID-19 pandemic.

Outlook: For FY22, the company expects its distribution to be around 22.0 cents per security, up from 21.5 cents declared for FY21. The company also planning for quarterly instalments of 5.50 cents per security beginning the September 2021 quarter.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Over the last one month, the stock has provided a return of 20.2% and in the last three months it has provided a return of 22.53%. The stock recently touched a new 52-week high price of $5.73. The stock has been valued using the P/E multiple based illustrative relative valuation method and arrived at a target price with a correction of high single-digit (in % terms). The company can trade at a slight premium to its peers, considering improved financial performance in FY21, net property valuation gains, and expected rise in FY22 distribution. For the purpose of valuation, peers such as Mirvac Group (ASX: MGR), Goodman Group (ASX: GMG), and Home Consortium Ltd (HMC have been considered. Considering the stock’s decent returns in the past few months, current trading level, uncertainty surrounding the impact of COVID-19 pandemic, and technical level mentioned below, we suggest investors to book profit and give a “Sell” rating on the stock at the closing price of $5.73, as on 20 September 2021, AEST 12:40 PM (GMT+10), Sydney, Eastern Australia.

Technical Note: On the daily chart, LEP stock prices are trading below the horizontal trendline resistance zone and continuously facing the resistance of the same at AUD 5.79 level. Moreover, the momentum oscillator RSI (14-period) is trading in an overbought zone at (~80.47 level) and which might indicate the possibility of a correction from the current levels. An important support level for the stock, is placed at AUD 5.10 while the key resistance level is placed at AUD 5.80.

LEP Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.