8/2/24

Half year results were good, although I still think that the market is way too excited SP wise.

If I assume that:

1) Current rental income is around 30% below market (which the head of the REIT was quoted in the AFR as saying)

2) I assume that the incremental cost of debt is somewhere around 5% in the medium term (current market rates would be somewhere around 6.5%),

3) Direct Property Expenses stay steady (won't happen)

4) Management and RE expenses hold steady (doubtful)

I get distributions somewhere around $0.25 p/u, which is somewhere around a 7.5% yield on the current market price.

But it will take years for distributions to get to this level (if at all) OR interest rates to fall dramatically (they could, who knows?). There's not enough here to be interested in at the moment.

14/8/23

FY23 Results are in and honestly I'm surprised at how close some of my initial modelling was for FY23.

I'd give management a B+ for FY23. They have partially repented for the acquisition spree they went on in the Covid melt up over the 2021/22 period.

The issue of convertible notes was extremely savvy. I honestly don't know who would buy these things but CIP has absolutely fleeced them IMO.

The divestment below was also a good outcome for unit holders. Again, not sure what the counter party is doing.

FY24 Guidance was for FFO and DPU to remain stable compared to FY23.

I still think this is overvalued on a risk adjusted basis compared to C2FHA and possibly the manager - CNI.

Will keep a close eye out.

6/7/23

Valuations down 2% on prior book values. Not really much useful information in the latest announcement for the purposes of valuing CIP, apart from management fees dropping by 2%......

Most of the decline was due to the two super long WALE assets, which were held as nosebleed valuations throughout the last 18 months.

Not enough information for me to change my valuation. Will await FY23 results.

also worth noting DXI reported similar valuation declines. I actually think Dexus is the superior manager (based on my surface level observations).

3/2/2023

CIP has been on a rampage in 2023 and I've sold out as of yesterday.

The current valuation just doesn't give you a high enough return based on the distributable income that this will spit out.

In my opinion the market is assuming that the terminal cash rate is closer to 0% than current levels and that LFL rental income can increase by 5% into perpetuity.

The market could be right, but I don't think it's weighting it's probabilities very well.

If I assume 5% rental growth and dial cost of debt back down to around 3% I get FY27 distributions close to 25c per unit. Which would equate to a yield of around 7% based on todays price, which seems about right. Only problem is that this needs to be discounted back to todays value. Sure, you'd get distributions in the meantime, but are they an adequate return on your investment?

Market too optimistic for mine.

4/8/22

Guidance of $0.17 FFO and $0.16 DPU for next year. Interest cost and the issuance of new units are the two factors I underestimated.

I've tried to reverse engineer the guidance provided. The guidance incorporates an assumption that the BBSW will average 3% for FY23. This is conservative in my opinion.

I've forecasted income by doubling the income generated in the second half of FY22 and then increasing that figure by 3.5% (LFL income was 3.4%) for the year just passed.

I've revised my valuation making the following assumptions:

1. Big increases in interest costs until 2025 as hedging rolls off and cost of debt normalises around 4.5%.
2. LFL income growth of 3.5% for the next 10 years is achievable
3. Book values stay steady so management fees stay at current levels.
4. Direct Property Expenses are mostly recoverable, so any increase would be cancelled out by an increase in revenue.
5. No dumb capital raisings at discounts to NTA.
6. Discount Rate 8%
7. Terminal growth of 2.5% after 10 years.

Given NTA is reported at $4.24 , there is obvious upside if some properties can be sold at/near book value and funds can be used to reduce debt/recycled into higher returning assets/buy back units.