The DEXUS Property Group (ASX: DXS) share price saw minimal market reaction this morning following the release of the company's H1 FY20 results.
Dexus is an Australian real estate group with areas of operation that include direct property portfolio; investing in Australian office and industrial properties; and third-party fund management which manages office, industrial and retail properties located in Australian markets.
Since the beginning of this year, Dexus's share price is up 9.2%. However, over the last 12 months, Dexus shares are only up by 8.9%.
Higher NPAT driven by revaluation gains
Dexus recorded net profit after tax (NPAT) of $994.2 million, up 36.9% from the previous corresponding period (pcp). This uplift in NPAT was driven by net revaluation gains of investment properties of $724.4 million, which were $267.9 million higher than the pcp.
Underlying Funds From Operations (FFO) per security increased by 1.9% on the pcp to 31.9 cents, while distribution per security of 27.0 cents was consistent with the pcp. Net tangible assets per security increased by 5.9% over the six-month period to $11.10.
Additionally, Dexus' gearing of 25.5% at 31 December 2019 remains below the target range of 30-40%, with the average cost of debt reducing to 3.5%.
During the half-year period, Dexus successfully completed the issue of $200 million of medium-term notes with a 10-year tenor.
Operational highlights
The company stated it had maintained high occupancy of 97.4% for Dexus office and 96.0% for Dexus industrial portfolios. What's more, Dexus completed the 240 St Georges Terrace development in Perth and progressed the group's $11.2 billion development pipeline.
The Dexus Wholesale Property Fund (DWPF) raised around $180 million of new equity and continued to outperform its benchmark across all time periods.
Dexus also realised $27.8 million of trading profits (net of tax), driven by the sale of the first tranche of 201 Elizabeth Street in Sydney.
Adding to the results, Dexus' office portfolio occupancy continues to capture the upside in the Sydney CBD market, achieving 18% re-leasing spreads this period. Up to the end of FY22, the company believes it has the opportunity to reset rental levels across its Sydney portfolio, which remains under-rented.
In Melbourne, prime office vacancy has tightened to a record low of 1.8% and six new tenancies were secured.
Dexus noted that the December 2019 quarter had seen increased enquiry levels across a broad range of industries compared to the pcp. The company expects continued solid employment growth in Sydney and Melbourne, combined with positive conditions in the business services sector, will positively influence occupier demand over the next 12 months.
