Reporting Season: Investa fiscal 2018 result in line with expectations

By Trevor Hoey. Published at Aug 8, 2018, in Features

Name: Investa Office Fund (ASX:IOF)

Market Capitalisation: $3.1 billion

Last Closing Price: $5.17

Investa Office Fund (ASX:IOF) generated funds from operations (FFO) of $184 million in fiscal 2018, representing earnings per unit of 30.6 cents.

FFO was circa 6% ahead of consensus forecasts.

The full-year distribution of 20.3 cents per unit was in line with Ord Minnett’s projections, and management’s fiscal 2019 guidance indicates that this will be maintained.

However, FFO guidance for fiscal 2019 is 4.6% lower at 29.2 cents per unit.

Valuation gains were the primary contributor to the Fund’s uplift in Net Tangible Assets (NTA) per unit of 14.2% to $5.47, implying upside to the last closing price.

While management expects to achieve fixed rental increases and positive leasing fundamentals in Sydney, it has indicated that the impact of sales, vacancies and refurbishments across other properties is likely to offset the benefits of these developments.

Those considering this stock shouldn’t make assumptions regarding future earnings, nor should they base investment decisions on performances to date. Those considering this stock should seek independent financial advice.[ME1]

Balance sheet in good shape

IOF’s gearing of 23% at 30 June 2018 is below the target range of 25% to 35%, providing capacity to fund anticipated development and refurbishment expenditure.

At the end of fiscal 2018, the weighted average debt expiry was 4.4 years with the weighted average cost of debt of 4%.

The Fund’s weighted average debt hedged over the financial year increased to 77.9% and is anticipated to remain at the upper end of the Fund’s 50% to 80% target range for the short to medium term.

Australian dollar denominated Medium Term Notes with a value of $125 million were repaid on expiry and an additional $300 million of new bank debt facilities were installed with terms of four and five years.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

Publishers Notice

The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.