HomeCo Daily Needs REIT (ASX: HDN) has reported FY24 results in line with management expectations, showcasing resilience in a challenging economic environment.
Key Financial Highlights
- Property net operating income: Increased by $11.6 million to $272.9 million.
- Funds from operations: Slightly up to $178.1 million, equating to 8.6 cents per unit.
- Distribution: Aligned with guidance at 8.3 cents per unit.
- Net tangible assets: Maintained at $1.44 per unit despite rising capitalisation rates.
- Gearing: Remains conservative at 35.1%, within target range.
- Acquisitions: $293 million worth of high-growth metropolitan assets acquired, targeting a 7% ROIC.
Management Commentary
CEO Sid Sharma attributed the strong performance to the REIT’s portfolio strategy, emphasising its focus on metropolitan assets with limited exposure to cyclical retail spending. HDN boasts an impressive occupancy rate of over 99%, collects nearly all billed rent, and maintains industry-leading positive re-leasing spreads of 6.0%.
Fund manager Paul Doherty highlighted the company’s low gearing as a foundation for future growth and asset recycling.
Outlook: Steady Growth and Attractive Yield
HomeCo Daily Needs anticipates stable earnings growth in FY25, with FFO projected to increase by 2.3% to 8.8 cents per unit. Consequently, the distribution is expected to rise by 2.4% to 8.5 cents per unit, translating to an attractive distribution yield of 6.8%.
Despite trading at a 14% discount to NTA, the REIT’s solid performance and growth prospects make it a compelling investment option for income-focused investors.
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