Research ASX200: Dexus Property Group (DXS)

StoneBridge Snapshot -Dexus Property Group (DXS) $0.75

• DXS operates under a stapled security structure and is an owner, manager and developer of a high quality portfolio of office and industrial properties valued at approx. $9bn at 31 December 08.
• Notable properties include the Governor Phillip and Governor Macquarie Tower complex, 30 The Bond and Australia Square in Sydney, Woodside Plaza in Perth, and 360 Collins Street in Melbourne.
• 98% of the groups operating earnings are derived by rent from the investment property portfolio and 1H09 income grew by 1.5% on a like for like basis which we saw as a reasonable result in view of difficult operating conditions. The portfolio WALE is 4.8yrs and current occupancy sits at 93.1% (Office 98%, Industrial~90%).
• Geographically assets are weighted 70% to Australia, 26% US, 4% Europe and by sector 50% Office (with 94% of these assets rated A-grade or premium), 47% Industrial and 3% Retail.
• The average portfolio cap rate was 7.4% at 31 December 08, falling from 6.7% at 30 June 08 (8% asset value decline in total) and 6.4% at the peak in December 07.
• DXS has spent the last six months focused on balance sheet and liquidity management via completion of a $749M capital raising in late May @ $0.65/security which followed a $313M institutional placement @ $0.77/security in December 08 and is now well placed on our estimates liquidity wise to meet its refinancing and capital commitments out until December 2010, which would be enhanced by any asset sales executed.
• Balance sheet metrics are sound and well within covenant limits with Gearing post raising 28.8% v 55% covenant limit (Borrowings/Total Tangible Assets excl derivatives) and interest cover 3.2x v 2.0x covenant limit Valuation metrics around DXS are attractive by virtue of it trading at a 33% discount to the post raising NTA of $1.14/security and on an implied cap rate of ~10% v 7.4% book.
• If cap rates soften 50 pts to 7.9% DXS NTA falls to $1.03/security and at 8.4% (200pts from peak) NTA is estimated at $0.93/security.
• FY10 EPS guidance 8.4c/security (P/E 9.0x) with DPU guidance 5.9c/security (yield 7.9%).

View Dexus Property Group (DXS) Research

Related Posts:

1. Stonebridge Research: Commonwealth Property Office Fund (CPA)
2. Stonebridge Research: ING Office Fund (IOF)
3. Stonebridge Research: ING Office Fund (IOF)
4. Research ASX200: Forte Energy NL (FTE)
5. Confidence in shares, property hit all-time low
6. StoneBridge Research – OZ Minerals Limited
7. StoneBridge Snapshot – Silver Swan Group Limited