Charter Hall Retail (CQR): this morning, the supermarket landlord reported their full-year results for 2024, 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 3% weight to CQR.
Key Points:
- Profits Down: CQR reported operating earnings down 5% to $159 million, driven primarily by an increase in interest repayments and divestments, which was partially offset by a 3.2% increase in rental yields from shopping centres and 5.5% rental yield increases from service stations.
- Distribution: CQR reported FY24 distribution of 24.7 cents per unit, representing a payout ratio of 90.3%.
- Stronger Balance Sheet: Following the divestments, CQR gearing is now 27%, with an average cost of debt at 4.9%, with no debt maturing until 2026.
- Valuation: CQR NTA per unit decreased by 4.7% to $4.51 after divesting $315 million worth of properties at book value over the year.
- Outlook: CQR provided guidance for FY25 operating earnings to be 25.4 cents per unit with a distribution of 24.7 cents per unit, representing a 7% distribution yield.
Portfolio Strategy: CQR offers 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 +1% to finish at $3.59 still trading at a discount to NTA despite selling supermarket assets at NTA.
