Charter Hall Long WALE REIT (ASX: CLW) released its FY19 results this morning, showing a large increase in revenue but a cut to profit from ordinary activities. Here’s what you need to know.
About Charter Hall Long WALE REIT
Charter Hall is one of Australia’s leading property groups, with more than $28.4 billion of leased property in the office, retail, industrial and social infrastructure sectors.
Charter Hall Long WALE REIT (CLW) is one of the many real estate investment trusts that they operate.
CLW consists of 114 properties with a total valuation of approximately $1.9 billion. The “WALE” part of the name refers to the weighted average lease expiry, which is 12.5 years for this portfolio.
Here Are The Five Key Points
- Revenue from ordinary activities increased by 24.6% to $85.6 million
- Profit from ordinary activities after tax fell by 16.5% to $69.6 million
- Operating earnings increased by 21.3% to $70.8 million
- The portfolio grew by $608 million to $2.13 billion following $533 million of acquisitions and $64 million in gross property revaluations
- Distributions for the year of 26.9 cents per unit, up 2% on FY18
Analyst Estimates
Based on Bloomberg analyst estimates, Charter Hall Long WALE REIT performed largely as expected. Estimated net profit after tax (NPAT) was $68.55 million versus the actual result of approximately $69.6 million.
The final distribution was estimated to be 6.4 cents per stapled security, which is the same as the actual result.
Statutory Profit Fell
The reason behind the 16.5% decline in statutory profit was $20.2 million of unrealised losses on derivative financial instruments and $16.8 million of acquisition and disposal related costs.
The operating earnings per unit are arguably more important, and this figure increased by 1.9% over FY18.
Management Commentary
CLW fund manager Avi Anger said the REIT has managed to increase its weighted average lease expiry (WALE) by nearly two years.
“Our WALE enhancing acquisitions, active approach to leasing and partnership approach with our tenant customers has enabled us to increase the portfolio WALE from 10.8 years to 12.5 years,” he said.
“During the period we upgraded original FY19 Operating EPS guidance, and then delivered at the top end of this upgraded guidance range.”
FY20 Guidance
If current market conditions persist, CLW expects FY20 operating EPS of 28 cents per security, reflecting growth of 4% over FY19.
Summary
While statutory profit fell, it was mostly due to unrealised losses and acquisition costs. The increase in operating EPS and the forecast growth of 4% in FY20 seem to be positive signs. If you’re interested in REITs, this may be one to add to your watchlist.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
