Why the Abacus Property share price is on watch today

The Abacus Property Group (ASX: ABP) share price is on watch this morning following the release of its FY 2020 results.

Abacus is a diversified property group that specialises across Australia’s commercial property markets. It invests in a range of activities including office, retail and industrial properties, and self-storage facilities.

Profit down sharply

Abacus reported that group statutory profit had declined significantly by 58.2% during FY 2020 to $84.7 million. Abacus funds from operations (FFO) came in at $124.6 million, down 3.6% from $129.2 million in the prior financial year.

On a positive note, the property group has maintained a strong balance sheet during the FY 2020 period. This was backed by healthy levels of liquidity and gearing that are currently below its target gearing level. The operating performance of both the office and self storage portfolios was strong, especially in light of the coronavirus pandemic challenges.

Abacus noted that 87% of its total assets were now deployed in office and self-storage investments.

Funds from operations (FFO) per security came in 19.38 cents. This was a decline of 13% from the 22.28 cents recorded in FY 2019. Distribution per security (DPS) for Abacus was flat on the prior year, coming in at 18.50 cents.

The distribution payout ratio was recorded as 95% of FFO, while gearing was 26.5%. The latter was 240 basis points higher than levels in FY 2019.

Abacus managing director Steven Sewell said:

“Following a pivotal year of capital deployment into our key sectors of office and self-storage, Abacus is positioned as a strong asset-backed, annuity style investment house focused on the ownership and management of our assets. A combination of established and new collaborative joint ventures has created enduring investment opportunities and facilitated our capital recycling program.”

Market Outlook for FY 2021

Abacus noted that it remains optimistic on its AREIT market positioning in both the office and self-storage sectors over the next 12 months. At the same time however, the property group acknowledged continuing market uncertainty due to the coronavirus pandemic. 

Abacus believes that a combination of active asset and development management along with good customer communication, will result in attractive risk adjusted returns over the medium to long-term.

The Abacus board anticipates that its distribution for FY 2021 will result in a payout ratio of between 85% to 95% of FFO.

How has the Abacus share price performed lately?

The Abacus share price trended sideways during the 12 months prior to late February. It then fell sharply in the following month during the early phase of the coronavirus pandemic.

The Abacus share price has only made a slight recovery since then and was $2.63 at close of trade yesterday.

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Motley Fool contributor Phil Harpur 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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