Did Cromwell Property Group continue to improve its portfolio valuation?

Team Veye | 09 Apr 2020 ASX - CMW
Did Cromwell Property Group continue to improve its portfolio valuation?

Cromwell Property Group (ASX: CMW)

Mandatory Commercial Tenancy Code of Conduct and Cromwell FY20 Guidance Update

Cromwell Property Group (ASX: CMW) (Cromwell) noted on 3 April 2020 the announcement by the Prime Minister of a mandatory commercial tenancy code of conduct to help struggling businesses through the COVID19 crisis.

(Chart source: TradingView)

FY20 Guidance and Financial Position

In February 2020, Cromwell reported HY20 operating profit of $134.1 million, equivalent to 5.18 cps, a 26% increase from the 4.10 cps reported in HY19. At the half year, Cromwell was ahead of ‘run rate’ for its annualised guidance and continued to perform in line with expectations in the March 2020 quarter. 

The recently announced March 2020 quarter distribution will be paid in full.

59% Increase in Statutory Profit Per Security, Strategy Delivering Results for Securityholders

Cromwell Property Group (ASX: CMW) (Cromwell), on 27 February 2020 reported half-year (HY20) statutory profit of $227.3 million (HY19 $111.1 million), equivalent to 8.78 cents per security (cps), up 59% on the 5.52 cps in the prior comparable period.

(Graphic Source – Company Reports)

HY20 Highlights and Strategy Update

  • Statutory profit of $227.3 million, equivalent to 8.78 cps, up 59% (HY19 $111.1 million, 5.52 cps); 
  • Operating profit of $134.1 million, equivalent to 5.18 cps, up 26% (HY19 $82.6 million, 4.10 cps); 
  • Net Tangible Assets (NTA) up to $1.04 (FY19 $0.99); 
  • Weighted Average Lease Expiry (WALE) of 6.1 years and debt tenor of 4.2 years; 
  • Partnership with BlackRock Real Estate at 475 Victoria Avenue, Chatswood announced;
  • Group gearing of 41%, within the target range at 39% on a pro-forma basis (post Chatswood);
  • Total assets under management (AUM) of $11.9 billion; and
  • Strategic Review underway (Data Source – Company Reports)

 

Veye’s Take

Cromwell generates 40% of net operating income from government tenants which puts it in a strong and resilient position. Although everything has undoubtedly slowed down, there are still opportunities. Cromwell was able to recently announce a short-term lease deal with the South Australian Government for the Wakefield Hospital site to be used for COVID-19 patients. It also closed a portfolio sale on behalf of the Cromwell European REIT in France, Netherlands and Denmark for €65 million and simultaneously acquired a portfolio of three light industrial assets in Germany for €38 million in the previous week. Cromwell’s strategy involves maintaining a strong balance sheet and long-dated direct property portfolio. This provides income stability and security. It also enables Cromwell to recycle assets and invest. The stock was having correction which is almost ending. MACD appears to be on verge of a bullish crossover. We are Bullish on “Cromwell Property Group” and give it a “Buy” recommendation at the current price of $0.77

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