Waypoint REIT: CY21 guidance upgrade
About the author:
- Author name:
- By Fiona Buchanan
- Job title:
- Director of Research, Senior Analyst
- Date posted:
- 23 September 2021, 9:00 AM
- Sectors Covered:
- Property, AREITS
- Following completion of an Australian medium-term notes issuance (A-MTN), WPR has upgraded CY21 distributable EPS guidance from 15.72c to 15.72-15.80c (+3.75-4.25% on the pcp).
- The next catalyst relates to capital management initiatives in 4QCY21 following non-core asset sales. We note the buy-back is already active.
- The portfolio is valued at $2.9bn across 427 properties with a WACR of 5.4%; occupancy of 99.9% and a WALE of +10 years.
- WPR remains a preferred income stock with a distribution yield of 5.8% paid quarterly.
- We retain an Add rating with a price target of (login to view).
Upgrade to CY21 distributable EPS guidance on the back of A-MTN issuance.
A-MTN issuance extends weighted average debt expiry to 4.8 years
Waypoint REIT (ASX:WPR) has priced $200m of fixed-rate 7-year Notes at a coupon of 2.4%. The Notes rank pari passu with WPR’s existing senior unsecured debt, with proceeds to be used to partially repay WPR’s $336m term debt facility expiring in June 2023.
The Notes have been assigned a Baa1 senior unsecured rating by Moody’s and increase WPR’s weighted average debt maturity from 3.8 years to 4.8 years and the proportion of WPR’s debt that is fixed from 58% to 81%.
WPR stated that the Notes have been issued at a price which does not adversely impact its cost of debt.
We note that post non-core asset sales, gearing will sit around 28.7%
Forecast and valuation update
We adjust our forecasts for the revised guidance and sit at the upper end (15.80c) which implies +4% growth on the pcp and a distribution yield of 5.8%.
We continue to assume capital management initiatives occur in 4QCY21 and note achieving the upper end of guidance is subject to securityholders approving the proposed security consolidation at a General Meeting in 4QCY21.
Our blended DCF/NAV valuation remains (login to view).
Retain Add rating
WPR’s portfolio of service stations remains well placed given 99.4% of fuel income is contractually secured until May 2026. Over 90% of leases are triple net and 95% have 3% or higher fixed rent increases pa. Around 97% of rental income is received from Viva Energy (VEA). NTA is $2.75.
WPR remains suited to income investors with distributions to move to quarterly payment from September.
We expect non-core asset sales (flagged) in the near term and updates on capital management initiatives (as well as buy-back likely to be a capital return/security consolidation up to $150m).
Capital management initiatives; asset re-ratings and M&A.
Unknown COVID-related risks; higher interest rates; tenant default/non-renewal; disruption to petrol-based retailing which may impact key tenants.
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