Property For Industry Ltd lifted its half-year profit by 57%, boosted by a much larger revaluation gain.
Chief executive Simon Woodhams said: “Our strategy is focused on ensuring we optimise our portfolio and acquire the assets that will help us deliver the strong, stable returns our investors expect. By finding the right opportunities, looking for ways to add value where that makes sense, and maximising the rental returns from our existing portfolio, we continue to make the disciplined gains that have underpinned PFI’s growth since inception.”
Mr Woodhams said PFI had started to replace its non-industrial properties with quality industrial properties in sought-after areas: “Since the beginning of the year, $51.4 million has been committed to 2 prime Auckland industrial opportunities. 12-year leases have been secured at both sites, and the return to PFI is estimated to be around 5.35%.”
He said value-add strategies within the existing portfolio were also a priority, citing one project for Kiwi Steel Ltd (Keun Hong Lee), to be followed by 4 more projects for the company.
“Kiwi Steel’s 2500m² warehouse on surplus land at 212 Cavendish Drive, Manukau, achieved practical completion in early May, and since the beginning of the year the company has committed to 4 more new projects with a total value of $8.3 million. Combined, these 4 projects are expected to deliver a return on incremental cost of 6.3%. A further $10.8 million of projects are in advanced stages of planning & negotiation.”
Some comparisons confuse
The company, which released its results for the June half today, confuses comparisons by using June 2019 & June 2018 results in some lines, June 2019 & December 2018 in others, but in one section, on NTA/share, offers all 3 columns. The highlit NTA/share comparison in the 2019 news release is between December 2018 & June 2019. I’ve drawn consistent comparisons between June & June results.
In its full-year earnings guidance, PFI said the forecast 7.6c/share dividend would equate to 80-90% of funds from operations (FFO), 95-100% of AFFO.
Guiding to the mid-point of dividend policy ranges, FFO earnings of around 8.95c/share & AFFO earnings of around 7.80c/share, there’s potential for AFFO earnings/share to exceed guidance if current expectations for maintenance capex of 30 basis points isn’t incurred.
Highlights (June 2018 in brackets):
Rental & management fee income, up 6.4% to $47.6 million ($44.7 million)
Net rental income, up 4.3% to $40.96 million ($39.3 million)
Fair value gain on investment properties, up 195% to $23.45 million ($7.95 million)
Total income, up 35.6% to $72.4 million ($53.4 million)
Pretax profit, up 48.8% to $52.85 million ($35.5 million)
Net profit, up 56.9% to $46.4 million ($29.57 million)
Basic & diluted earnings/share, up 56.8% to 9.3c (5.93c)
Net tangible assets/share, up 10.9% to 183c (165c)
Investment properties, up 10.4% to $1.37 billion ($1.24 billion)
Total assets, up 11.3% to $1.42 billion ($1.27 billion)
Weighted average interest rate for drawn debt, 4.56% (4.86%)
Adjusted funds from operations earnings/share (AFFO), up 16.8% to 4.11c/share (3.52c)
The portfolio’s passing yield firmed to 6.09% (6.21%). Full valuations of 13 properties resulted in a total uplift of $23.4 million (8.8%). Revaluations:
- 10 properties with leasing transactions, up combined $25 million (11.3%)
- Takanini, 51-61 Spartan Rd, bought in March, up $0.7 million (4%)
- Penrose, 314 Neilson St, down $1.8 million (17%) due to a fire in April (PFI has material damage insurance up to a value of $9.65 million & 24 months of business interruption insurance in place for this property; the final amounts to be received under these insurances are yet to be determined & received), and
- Mt Wellington, 6 Donnor Place, where refurbishment has started following tenant expiry, down $0.5 million (2.6%).
Property For Industry
Attribution: Company release, reports.