I've decided to make an investment here after the AFR street talk article drawing my attention to the DXC and Waypoint portfolios last week. I see the 30 percent NTA discount as too good to pass up despite the challenges the businesses faces for the following reasons:
- The portfolio is 90 percent leased to large national tenants with average rent reviews of 3.1 percent per annum
- Currently offering an 8 percent yield (although I am factoring in 7.5 percent going forward as they've already forecast a 5 percent reduction in FFO next year due to higher borrowing costs)
- They've recently sold a few assets at slight premiums to book value which in my mind firms up the valuations they have in place and shows that the NTA of $4.03 is solid. There is also a buyback in place and they've expressed a desire to sell further assets to fund this going forward (seems to be the current plan to close the NTA gap which is huge).
I would say the main drawbacks are the rising interest rate environment and also just the general perception towards petrol stations as we head towards electric cars.
I ended up picking this one over Waypoint (Which is over 3 times the size) as the discount is 30 percent vs 12.5 percent.
Has anyone else been having a look at these? What do you think?
DXC Price at posting:
$2.85 Sentiment: Buy Disclosure: Held
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