Propertylink distribution exceeds guidance and forecasts

By Trevor Hoey. Published at Aug 14, 2018, in Features

Name: Propertylink Group (ASX:PLG)

Market Capitalisation: $620 million

Opening Share Price: $1.04

Propertylink Group (ASX:PLG) today announced strong financial and operational results for FY18, delivering distributable earnings of 9.25 cents per security, exceeding consensus forecasts and the group’s prior guidance of 9.0 cents per security.

The group has positioned its industrial portfolio to urban east-coast infill locations to benefit from the emerging themes of e-commerce and urbanisation, a move that is delivering strong tangible value.

In 2018, the group’s net tangible assets increased by 19% to $1.04 per security, broadly in line with its recent trading range.

However, if the company was priced in accordance with its yield (circa 9%), it could arguably justify a higher share price.

Distributable earnings were up 23% to $55.7 million.

Propertylink took advantage of strong market trends during the year, with the divestment of a number of external fund assets delivering average returns of 25% to investors and $22.3 million in performance fees to Propertylink.

Outstanding occupancy rates

Management said the company was expected to continue to benefit from solid performance fees and co-investment returns across its portfolio.

The group also has the balance sheet flexibility to take advantage of acquisition opportunities with gearing of 29.6% below the target range of between 30% and 40%.

Looking to fiscal 2019, occupancy rates stand at 99.2% and there is a low fiscal 2019 lease expiry profile of 11.2%.

The weighted average lease expiry (WALE) period is 3.8 years.

With fixed rental review arrangements in place, there is scope to achieve income growth from the existing portfolio.

Note that any decision with regards to adding this stock to your portfolio should be taken with caution and professional financial advice sought.

Investment management

The group also generates income from investment management of industrial and office assets across five external funds on behalf of global institutional investors.

Strong results continued to be achieved across the investment management platform, delivering an average total return of 25% to investors since the establishment of the external funds and 28% on assets divested.

Management said that it is receiving ‘extraordinary levels of interest’ from wholesale capital seeking real estate investments in Australia.

This could be attributed to the group’s continued ability to deliver strong returns and its willingness to take advantage of opportunities to realise value for investors where appropriate.

Management noted that this was an indication of its ability to source capital to drive growth across the investment management platform, potentially providing financing opportunities for portfolio expansion.

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