Is Centuria Industrial REIT having a strong balance sheet and diverse income streams?

Team Veye | 08 Apr 2020 ASX - CIP
Is Centuria Industrial REIT having a strong balance sheet and diverse income streams?

Centuria Industrial REIT (ASX: CIP)

Q3 FY20 Fund Update and Guidance

Centuria Property Funds No.2 Limited (CPF2L) as Responsible Entity of Centuria Industrial REIT (ASX: CIP) on 3 April 2020 provided CIP’s update for Q3 FY20.

  • FY20 forecast FFO revised to 19.1-19.5 cents per unit (“CPU”) (previously 19.6 - 19.9 CPU) 
  • FY20 forecast distribution guidance reaffirmed at 18.7 CPU
  • Portfolio occupancy remains high at 96.4%

 

The current position of CIP is summarised below: 

(Chart source: TradingView)

Property Portfolio 

  • CIP’s portfolio is 96.4% occupied with a WALE of 6.9 years as at 31 March 2020 
  • Over 66% of portfolio leases expire at or beyond FY24 
  • Resilient and defensive tenant customers with 54% of portfolio income derived from tenant customers directly linked to the production, packaging and distribution of consumer staples and pharmaceuticals 
  • Value add initiatives across portfolio progressing in line with forecast expectations, including expansion of Woolworths regional fresh food distribution centre at CIP’s existing asset in Townsville, QLD 
  • Settlement for the acquisition of 24 West Link Place, Richlands QLD for $8.0 million as announced on 18 December 2019

 

Capital Position 

  • Current gearing of 35.5%, at the midpoint of the target range of 30%-40% 
  • Current loan to value ratio of 38.2%, against a covenant of 55.0% 
  • Current interest cover ratio of 4.8 times, against a covenant of 2.0x 
  • Weighted average debt maturity of 3.6 years as at 31 March 2020 from a diversified lender pool with no debt maturities until December 2021 
  • $80m of undrawn debt headroom as at 31 March 2020 (Data Source – Company Reports)

 

Veye’s Take

CIP’s portfolio is 96.4% occupied with a WALE of 6.9 years as of 31 March 2020 with over 66% of portfolio leases expiring at or beyond FY24. It has Resilient and defensive tenant customers with 54% of portfolio income derived from tenant customers directly linked to the production, packaging, and distribution of consumer staples and pharmaceuticals. CIP appears to be well placed with a strong balance sheet and diverse income streams from customers in defensive sectors across a portfolio of 49 high quality industrial and logistics assets. The stock has an ascending triangle in the making, which can have the potential of another strong upside provided it closes above $3.05 with volumes for three days consecutively. Veye recommends a “Hold" on “Centuria Industrial REIT” at the current price of $2.80

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