Real estate investment trust Folkestone Education Trust (ASX: FET) turned in a solid half year performance with a 15.9% gain in distributable income on the back of a 15.6% increase in total operating income. The stock is up 3.38% to $2.14 in afternoon trade after the results release.
Folkstone is a REIT that specialises in childcare centre development and property management. It is the largest Australian property trust investing in early learning properties within Australia and New Zealand and has 357 early learning properties in its portfolio. Some of its biggest tenants are leading childcare centre operators like Goodstart Early Learning, G8 Education Ltd (ASX: GEM), Mission and Kidicorp.
Here are the half year results highlights:
Revenue: $24.4 million in total operating income, up 15.6%
Distributable income: $13.1 million, up 15.9%
Net profit after tax (NPAT): reported profit of $52.3 million, up 144.8% mostly due to net revaluation increment of properties
Earnings per unit: 25.4 cents per unit, up from 11.8 cents per unit
Distribution per unit: 6.35 cents per unit, up from 6.0 cents per unit
Current development sites: 10
Development sites under contract: 4
Full year outlook: The company expects full year distribution to be 12.8 cents per unit, a 6.7% increase on the previous corresponding period.
Folkestone focuses on property sites within 15km of CBD areas, as well as rapidly growing areas. Portfolio assets have a weighted average lease expiry (WALE) of 8.4 years and an occupancy rate of 99.7%. That means lease income is steady and dependable.
Childcare service is high in demand in every city, so Folkestone's properties are sought after by childcare centre operators, which has made this real estate trust a steady source of income for long-term investors. Distributions have grown an average annual 10.8% since 2011.
The five-year total shareholder return is a compound average 46.5% annually, thanks to a 364% increase in share price from $0.46 a share to $2.12 over the past five years. The childcare industry is highly fragmented with most centres owned by single private owners. Still, there never seems to be enough childcare centres to match the demand of a growing population.
Folkestone Education Trust can expand more to meet that need and potentially give unitholders a good income.
