Ann: Full Year Results Presentation, page-54

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dawgfather

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08/10/22

22:19

Post #: 64101936
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Originally posted by noomxx: ↑

Thanks Red Dirt Dan,
My concern is 4 fold:
a) effect of interest rates has not been reflected through the financial statements: both through interest rate expense (this will take several years to play through as REITS are hedged in the short term) and through rising risk free return negatively effecting cap rates (ie cap rates rising) which will reduce valuations
b) GMG current share price cannot be justified by dividend yield in isolation, as the yield is too low. Yes dividends might rise as future development slows down (freeing up capex, hence ability to pay higher dividends). But even with a rise in dividends, this is insufficient to hold for yield.
c) I think its very risky to view future REIT returns through the prism of the last 15yr playbook (ie central banks cut interest rates to minimal numbers whenever the economy goes into a down turn). There might be some marginal cutting, but only if the interest rate has increased sufficiently that there is some room to cut. RBA rates at 2.6% don't give that breathing space. A function of this is I don't see inflation dropping back to under 2% for several years at least.
d) Upside return vs downside risk: this matrix doesn't stack for me yet. I don't see future upside returns outweighing downside risk (especially with lack of dividend yield support).

Again my issue is not the quality of GMG. It's the price of GMG.

I am no perma D&G'er. Remember back to 2020, I think we were both buying REITS hand over fists. But that was 2020, central banks were doing all sought of fuzzy business to keep interest rates at zero. With zero interest rates, my risk was reduced significantly.

I think its different this time.

Next, for full disclosure: I am not heavily in cash, I am reasonably fully invested, which obviously effects my investment decisions and thinking. 2022 has been reasonably kind to me, I am up 25% odd for the calendar year to date. How much of this is luck (ie have reasonable exposure to coal, oil, tobacco etc which have acted as nice hedge, as well as avoiding any major blow ups in individual stocks) or skill, don't really know. Maybe right place at the right time.

Again for me it's about a matrix of return on capital and return of capital. For GMG I see minimal risk of return of my capital if one takes a very long term view because of the quality of the company. But I see substandard return on my capital because the share price is still too high relative to its business fundamentals over the next several years.

These are just my views.
Obviously the stock market is collection of buyers and sellers each with their own views.

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Do you have a view on the likelihood of rising rents to offset any negative effect of increase to risk free rates?

Gearing at 8.6% is at the lower end for most REITs. Charter Hall by comparison is around 30%.

GMG Price at posting: $16.46 Sentiment: None Disclosure: Not Held
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(20min delay)
Last $34.51		Change -0.460(1.32%)		Mkt cap ! $70.16B

Open	High	Low	Value	Volume
$35.00	$35.00	$34.32	$21.94M	635.2K

Buyers (Bids)

No.	Vol.	Price($)
14	784	$34.51

Sellers (Offers)

Price($)	Vol.	No.
$34.52	495	17

View Market Depth

No.	Vol.	Price($)
4	862	34.510
10	827	34.500
7	1000	34.490
4	815	34.480
7	1393	34.470

Price($)	Vol.	No.
34.520	772	19
34.530	1870	11
34.540	1181	9
34.550	722	8
34.560	885	7

Last trade - 15.19pm 21/07/2025 (20 minute delay)

GMG (ASX) Chart

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