Centuria Industrial REIT: Adding more chill factor

About the author:

Fiona Buchanan
Author name:
By Fiona Buchanan
Job title:
Director of Research, Senior Analyst
Date posted:
19 November 2020, 10:30 AM
Sectors Covered:
Property

  • CIP has announced the acquisition of three cold storage facilities for A$171.1m (WACR 5.43%; WALE 6.4 years; 100% occupancy).
  • The acquisitions will be funded via an underwritten placement (A$125m at A$3.06) as well as debt.
  • Following the acquisitions, CIP’s portfolio will be valued at A$2.3bn across 59 assets (WACR 5.43%; WALE 9.7 years; 96.8% occupancy).
  • Pro-forma gearing is 31.4% and NTA is A$2.81.
  • FY21 FFO guidance upgraded to be at least 17.5c and DPS unchanged at 17c.
  • We retain a Hold rating with a revised price target (login to view updated price target).

Adding cold storage assets

CIP has announced the acquisition of three cold storage assets across Brisbane, Sydney and Melbourne for A$171.1m excluding transaction costs (initial yield 5.62%; WACR 5.43%; WALE 6.4 years; and 100% occupancy). Settlement is expected in early December.

This follows the recent acquisition of a cold storage facility at Ormeau, QLD for A$43m (5.5% initial yield). CIP’s exposure to food distribution and cold store facilities is now 33%.

The new acquisitions will be funded via an underwritten placement (A$125m at A$3.06 now completed) and A$58.7m of debt. We note new securities are entitled to the December distribution.

FY21 FFO guidance updated/upgraded

FY21 guidance now comprises FFO of at least 17.5c (previously 17.4c) and unchanged DPS of 17c (vs 18.7c in the pcp). We update our forecasts for the most recent acquisitions which has resulted in minor changes. Pro-forma gearing stands at 31.4% (ICR 5x). NTA stands at A$3.81 (vs A$3.82 at June 2020).

Portfolio valued at A$2.3bn

Incorporating the above acquisitions, the portfolio is valued at A$2.3bn across 59 assets up from A$1.6bn across 50 assets at June 2020. Occupancy stands at 96.8%; WALE 9.7 years; WACR 5.66%.

Key tenants include Telstra, Arnott’s, Woolworths, AWH, Visy and Green’s Foods. In its recent 1Q update, CIP noted that FY21/22 lease expiries stand at 4.4%/10.8% respectively. We expect the next trading update with the 1H21 result in February 2021.

Retain Hold rating

CIP continues to be one of the few listed REITs offering investors pure exposure to Australian industrial property which is leveraged to the growing e-commerce/logistics thematic.

Post changes, our valuation moves (login to view updated price target) based on a 50/50 DCF/NAV (5.5% cap rate), which is also our revised target price. Near term catalysts relate to accretive acquisitions. Key downside risks to our forecasts include falls in asset prices; lack of access to funding; unknown impacts from COVID-19; and lease/tenant default.

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