Charter Hall Retail (CQR): this morning, the supermarket landlord reported their first-half results for 2023, which were better than expected and head of rival RGN. Though generally, there should be minimal excitement on results day for this very boring and stable supermarket trust. The HNW Income portfolio has a 2.9% weight to CQR.
Key Points:
- Profits up: Operating earnings are up +2% to $83.4 million; rental growth over the half was a pleasing 4% and reflects positive leasing spreads for CQR’s mostly non-discretionary tenant base, which is not likely to face the falling sales that discretionary retailers should see over 2022/23.
- Distributions Up: interim distribution +11% to 13 cents, not much of a surprise with the distribution declared late December to be paid 28/2. The increase in the distribution reflects the collection of CV-19 rental deferrals from 2020 and 2021.
- Operationally solid: full occupancy at 99%, 7.4-year weighted average lease term; key supermarkets showed a 4% increase in sales over the half, with 62% of CQR’s supermarkets now paying both base and turnover rent.
- Valuation: surprisingly showed a small +2% increase to an NTA of $5.01, one of the few LPTs to post an increase this month, though this was due to net assets with the cap rate expanding slightly.
- Outlook: FY23 distributions per unit were reaffirmed by management to be no less than 25.8 cents representing growth of no less than +5.3% over FY22 distributions = 6.2% yield.
Charter Hall Retail is held in several of the HNW portfolios and eoffers the portfolio exposure to non-discretionary retailing via a diversified portfolio of neighbourhood shopping centres typically anchored by a Woolworths or Coles supermarket as well as service stations. Long leases linked to CPI to quality tenants such as Woolworths, Coles, Aldi and BP give a high degree of confidence that CQR can maintain and grow their distributions over time
CQR was up +2% to finish at $4.13
