In morning trade the BWP Trust (ASX: BWP) share price has dropped lower following the release of its half year results.
At the time of writing the landlord of Wesfarmers Ltd (ASX: WES) subsidiary Bunnings has seen its share price fall 1% to $3.67.
Here is a quick summary of how the real estate investment trust performed during the six months to December 31:
- Total income up 2.7% on the prior corresponding period (pcp) to $79 million.
- Total expenses fell 1.4% on the pcp to $20.2 million.
- Profit before property gains increased 4.25% to $58.8 million.
- Gains in fair value of investment properties down 57% to $20.1 million.
- Net profit down 23.5% to $78.9 million.
- Interim distribution of 8.93 cents per share, up 1.7% on the pcp.
- Gearing of 18.4%, down from 19.8%.
What happened in the first half?
Total income for the period was $79 million, an increase of 2.7% over the previous corresponding period.
This was driven by a 99.1% occupancy rate and the commencement of straight-lining rent, which resulted in rental income increasing by $2.5 million for the period.
Excluding rental income from properties acquired or expanded since the previous corresponding period, rental income increased by approximately 2.5%.
This helped offset the impact of rent foregone from divestments and the redevelopment of sites vacated by Bunnings that occurred during prior periods.
As a result of this and lower borrowing costs, the trust was able to lift its interim distribution to 8.93 cents per share, an increase of 1.7% on the prior corresponding period.
However, it is too late for investors to get hold of this distribution. It will be paid on February 22 to unit holders that were on the trust's register on December 31.
Outlook.
Things look positive for BWP Trust in the second half. Management advised that rent reviews are expected to contribute incrementally to property income for the six months to June 30.
There are 41 leases to be reviewed to the CPI or by a fixed percentage increase and 10 market rent reviews of Bunnings Warehouses to be completed by the end of this financial year.
For the second half of the financial year the trust expects to maintain distribution growth at 1.7%. Which by my calculations means its shares offer a 4.9% distribution yield at the current share price.
Should you invest?
It may not be the most exciting investment, but I think BWP Trust is a good option for income investors due to the quality of its assets and tenants.
This could make it worth considering along with fellow property trust Rural Funds Group (ASX: RFF).
