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GPT

Why is GPT Group's Share Price Down 2% Today?

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

GPT-share-price

GPT Group's (ASX: GPT) announced their 2019 interim results today, delivering 2.0% in FFO growth per security and 4.0% growth in distributions. The group recently launched a share placement plan of $800m to fund additional investments in logistics and a project with stage 1 planning approval in Darling Harbour. The headline net profit however was down 51.6% to $352.6m, as revaluations made a substantially lower contribution than they did in the latter half of 2018.

GPT also updated their CY19 guidance, projecting DPS growth of 4% and 2.5% growth in FFO per security. The bullish outlook was supported by house price stabilisation, along with lower interest rates that will flow through to lower cap rates. Lower interest rates make assets with a set rental yield more attractive, meaning that investors accept a lower yield and pay a higher price for the asset. Additionally, the ongoing investment in infrastructure in both Sydney and Melbourne will support GPT’s core markets by making urban centres more attractive places to live and work. Tax cuts also flow through to rising rent through retail leases, many of which include a set percentage of the tenant’s sales as part of the lease payment.

One positive worth highlighting from today’s result is the $114.8m valuation uplift from GPT’s office portfolio. 70% of the valuation uplift has been driven from rental growth, which feeds through to price growth if cap rates do not rise. They also achieved an 8.2% return in their funds management division, an impressive result against a challenging commercial real estate environment. They also delivered a 9.6% total return across the whole business, a figure which includes rental returns and revaluation gains, which were a net positive for GPT.

GPT operates across retail, office and logistics real estate, concentrating on quality assets in the major urban centres of Australian cities. The group also has a funds management division which operates two wholesale funds, one focussing on offices and the other on shopping centres. GPT has a market cap of $11.9bn and trades on 7.8 times earnings, well below sector peers.

 


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978) (“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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