GOZ 1H11 Result

8/2/2019 GOZ 1H11 Result

1/7

RESEARCH NOTE PATERSONS SECURI TI ES LI MI TED 1

All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibilityor liability on any account whatsoever on the part of this firm or any member or employee thereof.

RESEARCH NOTE

GROW THPOI NT PROPERTI ES AUSTRALI A

I n v est m en t Su m m a r y

GOZ reported an operating profit of $15.8m for the 1H11, up 80%pcp and in line with our forecast. This was a result of theacquisitions made during the year. Underlying NPAT was also 63%higher, this being a product more of the dilution in 1H10 from therecapitalization. Like-for-Like rental growth was 1.9%.

Management have reaffirmed their 17.1c DPS guidance for FY11.

Asset values held firm with a portfolio cap rate of 8.6%. The NTAwas unchanged at $2.03.

GOZ has a sound debt position. The trusts syndicated debt facilityof $558 million with National Australia Bank and Westpac extendsto 30 June 2012. Hedging is high and there are no major marginincreases pending. While gearing is reasonably high post the 2009restructure GOZ is now well within its banking covenants.

Our view remains unchanged. GOZ remains a solid defensive yieldplay given its long leases and domestic focus. The newmanagement has done a sterling job of increasing investor valueand growing the trust while still being disciplined. While the truststill lacks liquidity things are moving in the right direction and wehave no doubt that GOZ will become larger and more liquid in thenot to distant future.

Following this result we have lifted our price target from $1.99 to$2.03 in line with the NTA. As a result we maintain our BUYrecommendation.

22 Feb r ua r y 201 1

12m th Ra t ing BU Y

Price A$ 1.91

Target Price A$ 2.03

12m Total Return % 13.6

RIC: GOZ.AX BBG: GOZ AU

Shares o/s m 212.8

Free Float % 50.0

Market Cap. A$m 406.4

Net Debt (Cash) A$m 399.9

Net Debt/Equity % 123.4

3m Av. D. Tover A$m 0.05

52wk High/Low A$ 2.04/1.67

2yr adj. beta 1.14

Valuat ion :

Methodology NAV

Value per share A$ 2.03

Analys t : Jonathan Kr iska

Phone: ( + 6 1 2 ) 8 2 3 8 6 24 5

Emai l : jk r [email protected]

12 Mont h Share Pr ice Per form ance

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

12 Months

SharePrice($)

0

2

4

6

8

10

12

14

16

Volume(million)

Pe r f o r m a n ce % 1 m t h 3 m t h 1 2 m t h

Absolute -3.1 -1.0 12.6

Rel. S&P/ASX 300 -5.6 -0.7 15.0

Soun d r esu l t , defens ive REI T

Year En d Ju n e 3 0 2 0 0 9 A 2 0 1 0 A 2 0 1 1 F 2 0 1 2 F 2 0 1 3 F

Reported NPAT ($m) (210.1) 46.7 43.5 38.4 40.5

Recurrent NPAT ($m) 14.9 22.5 34.5 38.4 40.5

Recurrent EPU (cents) 43.1 16.6 17.3 18.1 19.0

EPU Growth (%) (18.4) (61.5) 4.2 4.5 5.4

PER (x) 4.4 11.5 11.0 10.6 10.0

EBITDA ($m) 61.6 65.4 81.1 80.7 82.8

EV/EBITDA (x) 9.2 10.1 11.0 11.4 11.1

Free Cashflow 18.7 22.4 36.7 37.6 39.7

FCFPS (cents) 54.1 16.6 18.4 17.7 18.7

PFCF (x) 3.5 11.5 10.4 10.8 10.2

DPS (cents) 32.5 14.0 17.1 18.1 19.0

Yield (%) 17.0 7.3 9.0 9.5 10.0


2/7

22 February 2011 Growthpoint Properties Australia



High l i gh t s

So l id resu l t and in - l i ne

GOZ reported an underlying NPAT of $15.8m for FY10, 80% higher than the previous year.This was in line with our estimates and the result of the acquisitions made during theperiod. Like-for-Like rental growth was 1.9%.

Adjusted EPS was up +63% and DPS was up +53%. The current payout ratio is 100%.While these numbers are quite large, they are generally a product of the restructuring thatoccurred in GOZ in 1H10 and which led to a very low eps number in that period.

Guidance

Directors reaffirm guidance of 17.1c DPS for FY11.

Figure 1: Performance

$millions 1H10 1H11 ChangeNOI Growth 11% 22%

NPAT Reported 33.2 24.8 -25%

NPAT Adjusted 8.7 15.8 80%

EPS Adjusted 5.16 8.41 63%

Weighted average no. shares 170m 188m

DPS 5.5 8.4 53%

Source: Patersons

Rais ing and Por t fo l io Acqu is i t ion Com ple t ed

During the period GOZ successfully completed a $101 million rights Offer at $1.90 whichwas used to partially fund a portfolio of 7 Queensland properties, comprising 2 officebuildings, a car park and 4 industrial properties for a total price of $171.5 million.

The transaction changed GOZ from being 100% industrial focused to being a multi-sectorowner of property and was in keeping with earlier announcements about broadening theinvestment mandate. The associated increase in market cap gets GOZ closer to both indexinclusion and consideration by institutions.

While some dilution was expected given the issue price to NTA, the level of dilution wasmoderate and shows the discipline of management.

Figure 2: Change in portfolio allocation

Source: GOZ


3/7




Valua t ions ho ld f i r m

Of the 33 investment properties owned by the Group at balance date, 29 properties wereindependently revalued during the Half Year. The weighted average capitalisation rate(WACR) for the property portfolio, by last valuation, is 8.5%. This compares to the WACR

as at 30 June 2010 of 8.6%.

The NTA was stable at $2.03.

Figure 3: Portfolio Cap Rate

Cap Rates

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%

1H08 2H08 1H09 2H09 1H10 2H10 1H11

Source: Patersons

GOZ is very defen s ive

GOZ has some characteristics which make it one of the most defensive REITs in the sector.

100% domestic focus

100% occupancy

Very long WALE of 9.1 yrs with no near term expirees

High quality mix of tenants.

Leases are mostly fixed on 3.5-4.0% increases p.a.

Solid debt position (see next section)

Figure 4: Lease Expiry Profile Figure 5: Main tenants

Source: GOZ Source: GOZ


4/7




Sound Deb t pos i t i on

GOZs debt position is sound. The trusts syndicated debt facility of $558 million withNational Australia Bank and Westpac extends to 30 June 2012. Hedging is high and thereare no major margin increases pending. While gearing is reasonably high post the 2009

restructure GOZ is now well within its banking covenants.

Figure 6: Debt Facilities Figure 7: Interest Rate Hedging

Type Drawn Limit Available Maturity Margin

Tranche A 474,750 480,000 5,250 Jun-12 2.20%

Tranche B 73,569 78,000 4,431 Jun-12 2.20%

Upsizing 22,000 22,000 Jun-12 2.20%

TOTAL 548,319 580,000 31,681

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H150%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

%Hedged Hedge Rate ( incl margin)

Source: Patersons Source: Patersons


5/7




Gr ow t hp oin t Pr op er t ies Au st ral ia ( GOZ) $ 1.9 1

Cash Flow ( $m ) 2 0 1 0 A 2 0 1 1 A 2 0 1 2 A 2 0 1 3 A Pr o f i t & Loss ( $m ) 2 0 1 0 A 2 0 1 1 F 2 0 1 2 F 2 0 1 3 F

Oper at in g Cash f low 2 2 .6 3 7 .5 3 8 .4 4 0 .5 Pr oper t y NOI 6 8 .3 8 4 .7 8 4 .5 8 6 .8

Capex -0.1 -0.8 -0.8 -0.8 Other Income 0.0 0.0 0.0 0.0

Disposals 0.0 13.2 0.0 0.0 Expenses -2.9 -3.6 -3.8 -4.0

Acquisitions -85.4 -232.5 0.0 0.0 EBI TDA 6 5 .4 8 1 .1 8 0 .7 8 2 .8

Other 0.0 0.0 0.0 0.0 Depn & Ammort 0.0 0.0 0.0 0.0

I n v est in g Cash f low - 8 5 .5 - 2 2 0 .1 - 0 .8 - 0 .8 EBI T 6 5 .4 8 1 .1 8 0 .7 8 2 .8Equity Raised 183.1 99.8 0.0 0.0 Net Interest -34.0 -41.1 -42.2 -42.3

Increase (Repay) Debt -99.0 129.8 0.0 0.0 Asset Sales 0.0 0.0 0.0 0.0

Distributions Paid -11.4 -31.4 -37.7 -39.5 Unrealised gains 15.2 3.5 0.0 0.0

Other 0.0 0.0 0.0 0.0 Pr of i t Bef or e Tax 4 6 .7 4 3 .5 3 8 .4 4 0 .5

Fin an cin g Cash f low 7 2.7 1 9 8.1 - 3 7 .7 - 3 9 .5 Tax expense 0.0 0.0 0.0 0.0

Net change in Cash Held 9.7 15.6 -0.1 0.2 Minority Interests 0.0 0.0 0.0 0.0

Closin g Cash Ba lan ce 1 6 .7 3 2 .3 3 2 .3 3 2 .5 NPAT ( Rep o r t ed ) 4 6 .7 4 3 .5 3 8 .4 4 0 .5

Op CF/Dividend (%) 50.3 83.8 98.2 97.5 NPAT ( Ad j u st ed ) 2 2 .5 3 4 .5 3 8 .4 4 0 .5

Div iden ds ( Cen t s) Balan ce Sh eet ( $ m ) 2 0 1 0 A 2 0 1 1 F 2 0 1 2 F 2 0 1 3 F

Assets

Cash 16.7 32.3 32.3 32.5

Receivables 1.1 1.7 1.7 1.7

Investment Properties 728.8 931.8 932.6 933.4

Other Investments 0.0 0.0 0.0 0.0

Associates 0.0 0.0 0.0 0.0

Derivatives 0.0 0.0 0.0 0.0Other Assets 28.2 47.0 47.0 47.0

To t al Asset s 7 7 4 .8 1 0 1 2 .8 1 0 1 3 .5 1 0 1 4 .5

L iab i l i t i es

Interest Bearing Liabilities 416.6 546.7 546.7 546.7

Derivatives 14.6 7.3 7.3 7.3

Other liabilities 19.6 25.1 25.1 25.1

To t a l Liab i l i t ies 4 5 0 .8 5 7 9 .2 5 7 9 .2 5 7 9 .2

Valuat i on Minority Interests 0.0 0.0 0.0 0.0

N AV DCF Sh ar eh o lder s Fu n d s 3 2 4 .0 4 3 3 .6 4 3 4 .3 4 3 5 .3

Current Cap rate 8.3% Beta 0.90 EPS/ DPS 2 0 1 0 A 2 0 1 1 F 2 0 1 2 F 2 0 1 3 F

Assumed Cap rate 8.3% WACC 9.0% EPU (Reported) 34.5 21.8 18.1 19.0

EPU (Adjusted) 16.6 17.3 18.1 19.0

EPS growth (%) -61.5 4.2 4.5 5.4

Valuation: 2.04$ Val'n: 2.35$ DPS 14.0 17.1 18.1 19.0

Overv iew AFFO 16.6 18.4 17.7 18.7

Growthpoint Properties Australia (GOZ) is a REIT focused on DPS growth (%) -56.9 22.1 5.7 5.4

domestic commercial property with earnings only from Payout Ratio (%) 84.3 98.9 100.0 100.0

passive rental income. Management is internalised. Distribution Yield (%) 7.3 9.0 9.5 10.0

Rat ios 2 0 1 0 A 2 0 1 1 F 2 0 1 2 F 2 0 1 3 F

Boar d o f Di r ect or s Pr o f i t ab i l i t y

Lyndsay Shaddock Chairman NOI Growth (%) 6.3 23.9 -0.2 2.8

Tim Collyer Managing Director NPAT Growth (%) 50.9 53.6 11.4 5.4

Norbert Sasse Executive Director ROA (%) 2.9 3.4 3.8 4.0

David Spruell Non-Executive Director ROE (%) 6.9 8.0 8.9 9.3

Grant Jackson Non-Executive Director Tax Rate (%) 0.0 0.0 0.0 0.0

Francois Marais Non-Executive Director

Estienne de Klerk Executive Director Mar ke t P e r f o r mance

Price/Earnings (x) 11.5 11.0 10.6 10.0EV/EBITDA (x) 10.8 11.4 11.4 11.1

Su b st an t ia l Sh ar eh o lder s % Price/NTA (%) -5.9 -6.3 -6.4 -6.6

Growthpoint SA 67.0%

Emira Property Fund SA 9.1% Balance Sheet

Net Debt/Equity (%) 123.4 118.6 118.5 118.1

Net Debt/Assets (%) 51.6 50.8 50.8 50.7

Subt ot al 76. 1% Interest Cover (x) 1.9 2.0 1.9 2.0

NTA ($/share) 2.03 2.04 2.04 2.05

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

FY08 FY09 FY10 FY11 FY12


6/7




Recomm enda t ion H is to r y

B B

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

12 Months

SharePrice($)

0

2

4

6

8

10

12

14

16

Volume(million)

Date Type Target Price Share Price Recommendation Return

18 Feb 10 Research Note 2.06 1.67 B

17 Aug 10 Research Note 1.99 1.91 B 14.4%

06 Dec 10 Event Impact Email 1.99 1.93 B 1.0%

Current Share Price 1.92 -0.5%

Stock recommendat ions: Investment ratings are a function of Patersons expectation of total return (forecast price appreciation plusdividend yield) within the next 12 months. The investment ratings are Buy (expected total return of 10% or more), Hold (-10% to +10%total return) and Sell (> 10% negative total return). In addition we have a Speculative Buy rating covering higher risk stocks that may not

be of investment grade due to low market capitalisation, high debt levels, or significant risks in the business model. Investment ratings aredetermined at the time of initiation of coverage, or a change in target price. At other times the expected total return may fall outside ofthese ranges because of price movements and/or volatility. Such interim deviations from specified ranges will be permitted but will becomesubject to review by Research Management. This Document is not to be passed on to any third party without our prior written consent.


7/7



All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibilityor liability on any account whatsoever on the part of this firm or any member or employee thereof

Documents

GOZ 1H11 Result