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Equites increases fiscal year distribution, but stocks slide close to 6%

Logistics-focused equity property funds are one of the only local real estate investment trusts (REITs) to pay full dividends and increase dividends per share in the face of the Covid-19 crisis.

However, Tuesday’s share price fell almost 6% after the fund’s announcement. Annual results The year ended February 28, 2021.

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5 year stock price

The Group’s full-year distribution per share increased 2.4% to 155 cents (2020: 151.39 cents).

Equites has declared a final dividend of 80.56 cents per share. In the six months to the end of August 2020, the Group declared an interim dividend of 74.44 cents per share, bringing the total annual distribution to 155 cents per share.

read: SA-listed real estate gathers at the world’s top table

A 2.4% increase in total distribution is consistent with market guidance of 2-4% annual growth. However, this is far from the growth of more than 9% before Covid in the previous fiscal year.

dividend

Equites also pays shareholders 100% of its full-year dividend, but most JSE-listed peers are reducing their payments to save cash and weather pandemic pressure on their balance sheets (” We have introduced a payment ratio).

Some counters, such as Redefine Properties and Rebosis, chose not to pay last year as a result of a surge in debt or loan-to-value (LTV) ratios. Many listed real estate funds also defer interim dividends at the end of the year.

Equites CEO Andrea Taverna-Turisan ignored the market reaction and told Moneyweb that it had strong results throughout the year compared to most real estate companies in the group.

“Despite the Covid-19, we’ve recorded better performance than any other sector, so we won’t pay much attention to the stock reaction,” he says.

“The pandemic has also affected our business, but the strength and quality of our logistics-focused portfolio has given us an edge,” he adds.

“We are one of the only SA REITs that can manage to increase their dividends and pay 100% dividends.”

Rent income

Equites said in its results announcement that the growth achieved was driven by strong growth of 6.7% of similar net rental income in South Africa.

This is believed to be due to the escalation of strong, valid contractual leases, coupled with the lack of tenant defaults and the limited expiration date of leases over the term.

“Last year was one of the most difficult years to date, but Equites has a cautious approach to SA and UK defensive, high-quality logistics portfolios, conservative capital structures, and liquidity management across pandemics. Has benefited from. ”Taverna-Turisan points out.

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“Our financial performance over the last 12 months is a testament to our strength in our tenant base, our sound investment philosophy and our prudent financial risk management policy,” he adds.

portfolio

Cape Town-based REITs, which were listed on the JSE with a portfolio of approximately R1 billion in 2014, have grown their portfolio to R19.3 billion (until the end of fiscal year 2021).

According to Taverna-Turisan, about 65% of the Group’s pure logistics real estate portfolio is in SA and the rest is in the UK.

During that fiscal year, the Group’s SA portfolio was devalued by 5.7%. This is surprising given its strong tenant profile and similar rental revenue growth of 6.7%.

Nevertheless, it is worth noting that Covid-19 provided the fund with a total of 42 million Rant “short-term cash flow bailouts” to some SA tenants.

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Evan Robins, Portfolio Manager at Old Mutual Investment Group, commented on the market’s reaction to the latest results:

“Equites is not cheap, so the market is setting prices with high expectations.”

Equites is currently trading at a premium against net asset value (NAV), highlighting the strength of the fund compared to other REIT sectors. This sector is trading at a discount of about 25% against Nav.

High quality tenant

“Equites offers an industrial portfolio to high-quality tenants with long-term leases that escalate each year, allowing for distribution growth in this environment as well, with contractual increases and reduced lease expirations. It leads to a negative lease return, “says Robins.

“But the fund hasn’t been affected by the Covid and SA economies … the fair value of its portfolio has diminished. Without Covid-19, the fund’s distribution growth would have been more than double what was achieved. Let’s do it, “he adds.

Nesi Chetty, senior listed real estate fund manager at Stanlib, believes that the market reaction to Equites results could be a case of profit taking.

“We continue to support the defensive quality of the Equites portfolio, with little disruption to our logistics portfolio … Demand for high quality logistics assets in the UK remains very high and in the long run capital in that market. I do feel that there is room for compression, “he says.

“The valuation of the Group’s UK portfolio increased by 5% over the year on a similar basis, up 9.7%, including the impact of the Rand depreciation,” said Chetty.

“The UK logistics asset trading market is fairly fluid and Equites can steal asset sales against NAV at a fairly decent premium. In the UK, space occupancy was high in the previous period, about A 50 million square-foot warehouse lease has been signed, with Amazon having the largest share at 25%, “he adds.

Chetty states that Equites has an LTV of about 30%, which is more conservative than its peers.

Equites increases fiscal year distribution, but stocks slide close to 6%

Source link Equites increases fiscal year distribution, but stocks slide close to 6%

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