I have been very interested to read about the BWP takeover of Newmark (a smaller landlord holding 9 Bunnings Warehouse freeholds) this week as I am hoping it's the start of much needed consolidation in the space.
It's clearly a very different part of the property market along with NPR having a far worse gearing ratio (47% after the latest write down which they announced along with the merger) plus a significantly tighter WACR of 5.1% (I continue to believe that DXC already being all the way out at 6.3% gives us more valuation protection than the market gives us credit for along with being in a property class that is far more liquid..... Very few private investors can purchase a Bunnings warehouse which shrinks the pool of potential purchasers and made the NPR portfolio less liquid as a bad time).
The NPR discount is so wide that BWP have managed to pick them up in an all share takeover at a 43% premium (when factoring in the equivalent value of BWP shares being received) to the share price which is still a 17% NTA discount.
I don't necessarily want to see DXC get merged with a bigger REIT (WPR being the obvious candidate) however I'm hoping the increase corporate activity might be a catalyst for a bit of a re rating at the smaller end of the market and see us back up trading at around a 10 to 15% NTA discount which I'd consider to be fair value.
DXC Price at posting:
$2.62 Sentiment: Buy Disclosure: Held
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