Dexus Industrial (DXI): The industrial REIT reported their half-year results for 2024, which demonstrated the continued demand for industrial real estate assets. The HNW Income Portfolio holds a 3.5% weight to DXI.
Key Points:
- Profit up: Funds from operations (FFO) up 1% to $27.3 million or 8.6 cents per share, possibly the only REIT that did not see a fall in income due to rising rates over the last half. Operationally, DXI is very solid. Full occupancy is at 99%, and a six-year weighted average lease term saw 7.3% rental income growth. More importantly, DXI increased their occupancy for problem child Brisbane Technology Park to 96% from 86% in June 2023.
- Distribution: Distributions were in line with last year at 8.2 cents per security
- Operational Strong:
- Continued Balance Sheet Strength: Despite a slight decrease in the valuations, continued asset sales saw gearing decline to 21% (below the target range of 30-40%) with an average maturity of debt of 3 years. Unlike other LPTs, DXI were quicker to recognise changing conditions and began selling assets in 2022 to reduce debt and improve the average quality of their portfolio, selling a further $120 million of assets over the past six months.
- Valuation: NTA $3.32 per share, a slight decrease due to asset sales. Atlas sees that the 5.8% cap rate looks conservative, with similar industrial assets in Sydney and Melbourne trading around 4-4.4%.
- Guidance: Management reaffirmed the guidance for FY2024 with FFO of 17.1 cents per security and a 16.4 cents distribution per security, driven by high demand and low vacancy rates.
Portfolio Strategy: DXI is a well-managed industrial REIT, owning a diversified portfolio of industrial real estate valued at $1.6b with a development pipeline that will deliver earnings and distribution growth in the future. DXI trades at a 17% discount to NTA and on a 6% yield paid quarterly.
DXI was up +3.6% to $2.88
