Aventus closes NTA Gap with Earnings and Valuation growth

18 August 2021

Aventus have released their FY21 results with 7% growth in earnings and growth in valuations backed by significant yield compression in the sector.

Aventus Group CEO Darren Holland commented “The Aventus team has worked incredibly hard over the last year to deliver these outstanding results today and I am very proud of our performance. We have ended FY21 in a stronger financial position than pre-COVID, outperforming our guidance with FFO per security growth of 7.1%, underpinned by strong cash collection, higher occupancy, continued expense management and lower finance costs.

As flagged in June, the Group has achieved $297 million of net valuation gains, which is up 15.4% compared to 12 months ago. This has resulted in lower gearing of 30.3% which is at the bottom of our targeted gearing range, or 29% including the sale of MacGregor.

The results, along with confidence in the sector has helped Aventus reduce the discount to NTA gap from -2% to now be trading at a 17%+ premium to NTA.

Aventus have not acquired of any assets during the period, instead concentrating on their existing portfolio and to grow earnings by accelerating the development pipeline. Aventus disposed of the MacGregor Home Centre for a 56% or $15 million premium to book value.

Across the portfolio, average gross rents grew 3.3% vs FY20 and occupancy increased 0.8% to 98.8%. The COVID impacts on the portfolio have been minimal with 98% of cash collected through FY21.

Mr Holland said “Our portfolio has large store sizes that allow social distancing and Click & Collect facilities across 100% of centres. Currently 80% of the portfolio remains trading of which 32% are providing Click and Collect. In addition, our retailers have proved resilient and have been the beneficiaries of resurgent demand following the easing of previous restrictions, redirection of travel expenditure and Australians cocooning at home.

With respect to Fy22 guidance, Mr Holland said “Unfortunately, given the uncertainty surrounding the duration of the current lockdowns, we are unable to provide specific FY22 FFO per security guidance today. We will continue to monitor circumstances and reassess this position with the aim of providing guidance at a later date. However, we are committed to providing FY22 distributions to investors in line with the distribution policy payout ratio of 90-100% of FFO.”

Aventus REIT is on our Top Picks List.

The REIT commenced the year with a security price of $2.09 against a NAV of $2.14 (-2% discount to NAV) and closed the year at $3.16 against a NAV of $2.69 (17% premium to NAV). The REIT provided a 17.5c distribution for FY21, equating to a 8.37% yield, which together with a 51% lift in unit price would provide investors with a total return of 59.6%.

Key financial and operational highlights for the period are:

Financial highlights:

  • Funds from operations of $110 million, up 9.6% on 30 June 2020.
  • Funds from operations of 19.4 cents per security, up 7.1% on 30 June 2020, equating to 5% outperformance from initial FY21 guidance.
  • Distributions of 17.5 cents per security.
  • Net valuation gain of $297 million up 15.4% since 30 June 2020, lifting the value of the portfolio to $2.3 billion.
  • Gearing of 30.3%, down 5.7% since 30 June 2020 and at the bottom of the target gearing range.
  • Net Tangible Asset Value of $2.69 per share up 25.7% from $2.14 on 30 June 2020.
  • FY21 Total Shareholder Return of 53.4%, outperforming the S&P ASX200 A-REIT Accumulation Index return by 20.2%.
  • Sale of MacGregor Home for a 56% or $15 million premium to book value.

Operating highlights:

  • High occupancy of 98.8% up 0.8% since 30 June 2020 which is 3.9% above the national average.
  • 119 leasing deals across 75,000 sqm of GLA with positive leasing spreads and low incentives.
  • Income underpinned by 88% national retailers including Bunnings, Officeworks, Harvey Norman and JB Hi-Fi.
  • Strong rent collection of 98% across FY21.
  • Strong fixed reviews of 3.8% per annum for 77% of the portfolio.
  • Centre traffic growth of 6% across FY213 with a total of 44 million visitors to Aventus centres.
  • Portfolio capitalisation rate of 6.01%, a compression of 72 basis points since 30 June 2020.
  • Sustainable average gross rent of $336 psqm and a WALE of 3.7 years


Portfolio update

Acquisitions:

As mentioned above there were no acquisitions by Aventus.

Valuations:

Overall, the total property portfolio has increased by approximately $297 million (15.4%) since 30 June 2020, lifting the value of the portfolio to $2.3 billion. As indicated in the chart below, the vast majority of the uplift was as a result of a compression in valuation cap rates (72bps) to 6.01%. Income growth contributed $55m of net valuation uplift which has been driven by annual rent escalations and higher occupancy.

Capital Management

  • Substantial refinancing completed in FY21 with $660 million (or 80%) of the debt portfolio refinanced.
  • Debt duration extended to 4.4 years, with no expiries till January 2025.
  • Interest Coverage Ratio of 6.6x from 5.2x.
  • Cost of debt reduced to 2.8% from 3.1%.

FY22 Guidance

The REIT has indicated that due to the current lock down restrictions they are not providing FY22 distribution guidance to investors, other than to indicate that it will be in line with the distribution policy payout ratio of 90-100% of FFO.

Trading Chart

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