Waypoint REIT Limited

WPR Details

Rise in Gross Portfolio Valuation: Waypoint REIT Limited (ASX: WPR) previously known as Viva Energy REIT, operates a high-quality properties’ portfolio in Australia. Waypoint REIT is a stapled entity constituting one share in Waypoint REIT Limited and one unit in Waypoint REIT Trust and its controlled entities (Group). As of 31 December 2021, WPR finished an independent valuation on ~19% of its portfolio constituting 79 properties and conducted directors’ valuations on the remaining portfolio.

• It reported a gross valuation uplift of ~$130.0 million, (up by 4% on the previous book values) primarily due to the tightening of capitalisation rate. The results are subject to audit.
• The WACR (weighted average capitalisation rate) on the portfolio of ~427 properties compressed by 22 basis points (bp) from ~5.37% as of 30 June 2021 to ~5.15% as of 31 December 2021.
• On a pro-forma basis, the growth in gross valuation equates to ~6% increase on the company’s NTA per stapled security since 30 June 2021.

Cancellation of Buy-Back Shares: On 10 December 2021, WPR cancelled ~8.166 million shares for a total consideration of ~A$21.62 million post an on-market buyback of shares during the month.  The buy-back program was started on 1 December 2021 and is opened for up to 12 months.

FY21 Distribution Update:

• WPR announces an estimated distribution of ~4.21 cents per security (cps) for Q4FY21 (ended 31 December 2021) payable on 28 February 2022.
• WPR estimates distribution of ~15.97 cps for FY21.

Security Consolidation: On 17 November 2021, WPR confirmed the implementation of security consolidation post approval of the security holders at the General Meeting. WPR had ~729.81 million shares on issue post consolidation.

New Managing Director: Mr. Hadyn Stephens joined WPR as the new MD of the company with effect from 21 October 2021.

Raise of Debt Capital: in September 2021, VER Finco Pty Ltd, a 100% subsidiary of WPR declared the pricing of ~$200 million Notes at a coupon of ~2.4%. WPR plans to partially repay its ~$336 million term debt facility from the proceeds of the Notes issue and expand the weighted average maturity of its debt from 3.8 years to 4.8 years.

1HFY21 Results:

• The statutory NPAT grew by ~83.9% Y-o-Y to $251.9 million in 1HFY21.
• The gearing stood at ~27.3% as of June 2021 compared to ~29.4% as of December 2020, below the bottom end of the targeted range of 30-40%.

Key Metrics, Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of concentration of rental income from Viva Energy, changes in the valuation of property portfolio, regulatory concerns, and COVID-19 impact. General property market conditions, demand, and supply of traditional fuels/ alternative fuels, also have key impact on the financial performance.

Outlook:

• WPR plans to release the FY21 results for the year ending 31 December 2021 on 28 February 2022.
• WPR estimates ~15.80 cents of distributable Earnings per security for FY21, which is ~4.25% up on FY20 and at the top end of the upgraded guidance range of ~15.72 - ~15.80 cps for FY21.
• WPR is open to explore opportunities to purchase new fuel & convenience retail properties. It may reinvest in its current portfolio and consider divestments of close to ~12 non-core assets (classified ~$35.3 million assets held for sale as of 30 June 2021).
• The company plans to optimise the capital structure portfolio via the proposed buy-back of shares and debt refinancing via the recent issuance of fixed term Notes.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: 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: The stock of WPR gave a positive return of ~1.498% in the past week and a positive return of ~0.494% in the past nine months. The stock has a 52-weeks’ low level of $2.472 and a high level of $3.059. The stock of WPR has a support level of ~$2.450 and a resistance level of ~$19.85. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price with a correction of a high single-digit (in % terms). The company might trade at a slight premium than its peers’ median EV/Sales multiple, considering the updated uplift in gross portfolio valuations, compressed WACR, higher distributable Earnings per security for FY22 versus FY21. For this purpose of valuation, a few peers like Charter Hall Social Infrastructure REIT (ASX: CQE), Hotel Property Investments Ltd (ASX: HPI), GPT Group (ASX: GPT) have been considered. Considering the decent returns in the past months, an indicative downside in valuation, and associated key business risks, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the closing market price of $2.745, as of 31 January 2022, 1:19 PM (GMT+10), Sydney, Eastern Australia.

WPR 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.

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