Why COF price drop so much?, page-2

Guidance given by the management in terms of FFO and DPS are factors that caused the significant drop in Share price. The RBA's decision to increase the cash rate by 50bp and more interest rises for FY 23 are all contributing to the performance.

Having said that, lets compare the metrics of of FY21 and FY22.

FFO decreased from 19.9 to 18.2 cps, obviously not pleasing, but I believe FY21 benefited from the Foxtel surrender payment at Robina office which is not to be repeated in 2022.

Occupancy actually improved from 93.1 to 94.7%, again, this is partly because of leasing renewals and the acquisition of the Melbourne office which has 100% occupancy. However, this is still a pleasing result given the dire state of the office market.

WALE has decreased from 4.3 years to 4.2 years, this is actually not bad, one year passed and wale stayed the same, which meant leases are being renewed, buildings are getting occupied.

Rent collection remained pretty much the same as previous FY, gearing also remained the same.

Debt has increased from around 700M to 830M, this is because of the 2 acquisitions made in FY 22, the Morey St acquisition is reasonable IMO, 100% occupancy and new building with 6 years WALE, the Pacific highway is questionable and if it does not achieve the financial metrics and gets leased out quickly then the management will have questions to answer.

I'm quite surprised at the fact that 818 Bourke st is still empty despite all the effort they've put in refurbishing the building and given its location, it should get occupied fairly quickly, No point giving positive outlooks etc when the result does not speak for itself.

Overall, the results achieved is not A grade but not an F, most likely deserve a B for the work they've done. The market is punishing all REITS given the interest rate cycle and market always sell first and question later. Having interest rate rise of 2% in 1 year will hurt any portfolio, especially commercial ones when you have long leases locked in. Unlike residential, you can't really kick the tenant out and raise the rent by 30% and expect someone to take the property. Its just part of the game and something we will need to accept.

If you own a commercial property, a 2% rise in rate will definitely hurt your return, it is not something management can prepare for. Yes, you can argue that they can fix their rate or hedge all their debt, but you must know that hedging comes at a cost too. Try to fix your rate now for 3 years and see if the bank will give you a good rate or not.

I think the report is fair but not good, but the fall of 15% is excessive IMO, what does people really expect when they buy COF at 10% yield ? of course there is a high chance of them cutting the dividend. People are mad to think otherwise.