please find extracts from Legg Masons's April report, with more info available @ http://www.leggmason.com.au/en/pdf/monthly_reports/LMPST_monthly.pdf
Performance
The Legg Mason Property Securities Trust outperformed its benchmark by 0.5% over the month. Portfolio performance over the past year was 8.3% ahead of benchmark. The outperformance this month came on the back of active stock selection decisions. In particular, overweight positions in Valad Property Group (+23.8%) and Charter Hall Office REIT (+5.3%), an underweight position in Mirvac Group (-4.7%) and not holding ING Industrial Fund (-2.2%) added the most relative value. Valad and Charter Hall Office were two of the offshore focused A-REITs to gain ground this month. Valad had a win this month as its European business was confirmed as the new investment manager of European Commercial Real Estate (formerly Kenmore Europe). Our view for some time has been that investors had underestimated the value and growth potential of Valad�s European business; this type of announcement provides some vindication of our view.
Profile
Overweight Positions Active % Valad Property Group +4.7 Dexus Property Group +4.6 Charter Hall Office REIT +4.2 Charter Hall Retail REIT +3.8 Challenger Diversified Property Group +2.1
Outlook
A flat growth outlook and relatively stable earnings environment suggest that A-REITs may lack catalysts for near term appreciation. However, our view is that the medium term outlook for the sector is relatively bright as A-REITs have reduced their risk profiles over the past year and returned to traditional property rental streams. We believe that A-REITs� relatively low debt profiles and recapitalised balance sheets have positioned a number of select securities to outperform, particularly against unlisted property as well as some of the more highly leveraged Australian equity securities. As a result, A-REITs should produce returns that are less correlated to the equity market than recently experienced. The outlook for attractive relative returns continues to be strong, while opportunity measures remain at four times normal levels. With portfolio performance over the past year 8.3% ahead of benchmark and a valuation spread between the portfolio and the benchmark that remains significantly wider than normal, we continue expect to produce above normal portfolio returns over the medium term.
VPG Price at posting:
$2.20 Sentiment: Hold Disclosure: Held
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