Dexus

DXS Details

Robust Growth in Funds Under Management: Dexus (ASX: DXS) is engaged in real estate activities. The principal activity of the company is to own, manage and develop real estate assets. The company manages real estate funds on behalf of third-party investors. The company has consistently witnessed robust growth in its funds under management (FUM) since FY05. The company has shown a steady growth by registering $10.3bn of funds under management in FY20 ($10.1bn in 1HFY21) as compared with $1.5bn in FY05.

Growth in Funds Under Management (Source: Company Reports)

Sale of Asset Update: The company has announced on 6 April 2021 regarding the sale of its 50% holding in 10 Eagle Street in Brisbane. The sale will realise around $285mn, which will be used to repay its debt.

1HFY21 Financial Highlights: The company has registered $31.9mn of revenues from property management in 1HFY21, $34.6mn of revenues from funds management and $6.2mn of revenues from development management in 1HFY21. The company has posted a negative net margin of 3% in 1HFY21 compared with a positive net margin of 8% in 1HFY20.

Outlook: As per the company reports, DXS will remain focused on enhancing funds under management, improving rent collections, and increasing leased activities. The company intends to implement active leasing strategies to maximise office portfolio cashflow generation, increase weightings toward sectors with strong tailwinds and expand its flexible workspace offering. 

Valuation Methodology: Price/Earning based Relative Valuation Method (Illustrative) 

Data Source: Refinitiv, Thomson Reuters, 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: In the last one month, DXS has increased by ~7.70% and by ~8.16% in the last three months. The current market capitalisation of DXS stands at ~$10.56bn as of 8 April 2021. The stock is currently trading above the average 52-week price level range of ~$8.20-~$10.24. On the technical analysis front, the stock has a support level of ~$9.821 and a resistance of ~$10.232. We have valued the stock using a Price/Earnings multiple-based illustrative relative valuation method and arrived at a target price of high single-digit upside (in % terms). We believe that the company can trade at a slight premium as compared to its peer average, considering the company is registering growth in funds under management. For this purpose, we have taken peers Charter Hall Social Infrastructure REIT (ASX: CQE), Abacus Property Group (ASX: ABP), Mirvac Group (ASX: MGR). Considering DXS’s continued focus on debt reduction, growing FUM, modest outlook, valuation, we recommend a “Hold” rating on the stock at the current market price of $9.910, up by 0.916% as on 8 April 2021.

DXS Daily Technical Chart (Source: Refinitiv, Thomson Reuters) 

Note: 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.

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