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Cromwell – Not Much to Report

People & Companies / Latest News


Feb 27 2017

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CLSA reports that Cromwell (CMW) performed as expected in its 1H17 results, with an EPS of 4.5¢ (down 11.7%) that is impacted by FY16 asset sales, lease expiries and lower funds management income helped by IOF distribution.

FY17 guidance was reiterated (8.4¢) and NTA was up as well at 6.2% sequentially, but gearing increased 110bps to 45.0%. CMW has addressed some lease expires in FY17-2018, but it still has material expiring in FY17-2018 of 16.7% in tough markets. A sale of its IOF stake could reduce gearing materially, but CLSA does not see this saga dragging on. It has, however, increased CMW’s target price by 1% to $0.99 (from $0.98) and maintain a U-PF rating.

The findings indicate that CMW’s EPS is impacted by FY16 asset sales (A$169m) and expiries which resulted in like-for-like income down 5.7% YoY. CLSA notes that the fund management fees were lower, offset by an A$5.9m IOF distribution. It was also able to address leasing concerns as 65k sqm of leases were executed, increasing occupancy 290bps during the half to 92.3%. It also de-risked ACT expires in FY17, with the TGA complex renewed (3.7% of rental income) for five years to June 2022. Still, it has Health (2.7%) & Forestry (3.3%) Houses expiring in FY17-18 in QLD & Tuggeranong (5.6%) in FY18 remaining that need to be addressed.

CMW’s stake in IOF has appreciated A$24.1m to A$280.1m since it was acquired & contributed A$5.9m or 7.5% to its 1H17 result. However, CMW’s advances in IOF at present continue to be rebuffed on the grounds of price, certainty of funding, standstill clauses and access to due diligence. While CMW announced it is still engaging IOF’s advisors and was recently granted FIRB approval to acquire over 10% of IOF, the process has been dragging itself out and CLSA hopes to see its resolution.

SOURCE: Editorial


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