16/8/23

Haven't gone through FY23 results in detail but it looks like my near term expectations of $0.13 in distributions were still too optimistic - forward guidance is for distributions to still be well below this level. Hard to see much to get excited about unless interest rates come down.

20/5/22:

Revising this valuation. I've done some more research and think that my DPU assumptions are probably a bit high in the near term due to rising interest rates and tenant default risk. Bond yields have also increased dramatically meaning my discount rate has increased.

I've seen discount rate assumptions of sub 7% from brokers for this security recently. For me this isn't enough compensation.

Ave 13c Distribution over the next 10 years with a terminal valuation of somewhere around $2.00 (10% below todays NTA) gets me to $1.71 at a discount rate of 8.27% (10 year bond yield + 5%).

Feb22:

H1 FY22 was impacted by Covid, despite this DPU guidance for the full year was approx. $0.10 per share.

Assuming rental waivers start rolling off I see no reason why distributions can't return to somewhere around $0.13 per share. From there I've assumed no growth until year 10 with a 2% terminal growth rate.

To summarise why I've made these assumptions:

1. Rental waivers of $96 million in H1FY22, assuming a return to relatively normal conditions this equates to roughly 30% of FFO (and theoretically distributions)
2. Rental growth very constrained in the next 10 years.
3. 2% proxy for inflation (or slightly below).

Buy target: $1.74

Valuation: $1.93