The Arena REIT No 1 (ASX: ARF) share price is trading 1.79% higher in early trade (at time of writing) following the release of its FY20 results. Arena is a real estate investment trust (REIT) that invests in sectors such as childcare, healthcare, education and government tenanted facilities leased on a long term basis.
FY20 highlights
Arena REIT announced a net operating profit for FY20 of $43.8 million. This represents an increase of 16% on the prior corresponding period (pcp).
The REIT’s statutory net profit increased 29% to $76.6 million from $59.3 million compared to the pcp.
Earnings per share (EPS) of 14 cents is up 4% on the pcp. This came below consensus estimates of 15.8 cents per share.
The group was able to deliver a 4% distribution per security of 14 cents in FY20.
Total assets increased 23% in FY20 to $1,012.6 million on FY19 as a result of acquisitions, development capital expenditure and the positive revaluation of the portfolio. The revaluation of property was the primary contributor to the 6% increase in net asset value (NAV) per security to $2.22 at 30 June 2020.
Pleasingly, its gearing ratio has decreased from 22.1% in FY19 to 14.8% by FY20.
Commenting on the result, Arena’s managing director Mr Rob de Vos said, “Despite ongoing uncertainty, we remain confident in Arena’s strategy, the strength of our portfolio and the important contribution the services we accommodate will make in aiding economic recovery and improving future community outcomes.”
COVID-19 impact
Despite 100% occupancy being maintained, the group has experienced some impact from the coronavirus pandemic. It has provided some rent relief to some tenant partners amounting to 4% of contracted rent for FY20.
The breakdown of the impact on Arena during the pandemic for the period 1 July 2019 to 30 June 2020 is as follows:
- 96% of contracted rent receipted
- 3.5% of contracted rent deferred, of which 71% is scheduled to be received in FY21
- 0.5% of contracted rent abated.
Outlook
Arena has provided FY21 distribution per security guidance of between 14.4 and 14.6 cents per security reflecting growth of 3–4% over FY20.
Mr de Vos said:
Arena remains well positioned to navigate the ongoing and emerging challenges arising from COVID-19 and to consider new opportunities that are consistent with strategy and Arena’s investment objective of delivering an attractive and predictable distribution to investors with earnings growth prospects over the medium to long term.
The Arena share price is currently trading at $2.28 per share and has fallen more than 21% in the past year, largely due to the impacts of the coronavirus pandemic.
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Motley Fool contributor Matthew Donald has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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