I dont expect the distribution to increase this year.
It may next year - but that would also be an unexpected bonus.
I think the annual distribution at the moment is around 4.4c - there is possibly some room for that to move. It would be great if it did. If/when it returns to the 8c+ mark I will be delighted!
However, for this to happen, rents need to hike up, along with operating costs coming down - mostly rents going up though - and honestly I don't see that happening next year, other than the natural rent increases built into contracts.
I do expect earnings to increase by about 5% / year naturally though - via the lease agreements the company signs with its majors.
I can quote Michael Cameron (CEO) on this though:
"Our distribution guidance ties in with our earnings guidance. At this point we’re comfortable with earnings of $365 million and a distribution of 4.5 cents for the full year. We’re not going to revise our guidance at this point....The key driver will simply be the earnings from the business: as our earnings continue to grow, there will be proportional growth in the distribution."
And on earnings growth, Mr Cameron said:
"The main drivers were our high occupancy levels – at around 99 percent – and long lease terms. That reflects the high quality of our portfolio: regardless of where we are in the cycle, our high quality assets tend to perform well. Also, a large proportion of our tenants have structured rent increases and that guarantees a certain level of growth each year unless occupancy starts to weaken. The core business had like-on-like growth of 4.4 percent."
As for the share price - it may go up with asset revaluations - I personally dont value it that way, I look at its profitability.
Its currently forecasting earnings of about 400m and its market cap is about 6bn odd, give or take. That is putting it at about 15x earnings - which is starting to get a bit on the high side.
I think that for the share price to hike, some or all of the following things need to happen [in no particular order]:
- The company acquires something that is earnings positive
- The company divests assets at near or greater than previous book values
- The company becomes the target of a takeover attempt
- The company announces a significant profit in the next period, probably due to favorable hedging / currency close outs, given the movement in the AUD (its funny money and not really value creating, but such news will undoubtedly move the share price)
I don't know which, if any of these may or may not happen between now and December.
Disc: I hold far too many of these. But its better than the bank.
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