BWP Trust (ASX:BWP) reported its half-year results today. Here are the key stats from BWP Trust's half-year report to 31 December 2016:
- Revenue rose 1% to $75.7 million
- Profit before gains on investment property rose 4%
- Net tangible assets rose 3%
- A dividend of 8.63 cents per unit was declared, up 4%
- Rental income grew 2.4%
- Weighted average lease expiry (WALE) fell to 5.5 years (down from 5.9 years)
In mid-2016, Woolworths Limited (ASX: WOW) discontinued its Masters Home Improvement business. Bunnings Warehouse, the key tenant for BWP Trust's properties, said it would take up 15 ex-Masters properties and seven of BWP Trust's properties would be exited.
BWP Trust has plans to make use of the sites in alternative ways, such as mixed use residential developments and shopping centres.
Pleasingly, finance costs fell by 8.4% with the cost of debt being just 4.6% at the reporting date. Interestingly, the capitalisation rates used by independent valuers was 7.16%, higher than the December weighted average of 6.77%.
Looking ahead, the company expects rent reviews to contribute to property income in the second half with four market rent reviews of Bunnings Warehouses due. A number of other leases will also be adjusted to inflation or scheduled for fixed rate increases.
Over the full year BWP Trust expects to report dividends up 3% over the prior year, consistent with its earlier outlook.
Buy, Hold or Sell
BWP Trust has proven to be a reliable dividend payer, with a number of quality properties and tenants offering a consistent stream of rental income. However, this income is not guaranteed and real estate trusts can very quickly run into trouble if they are not well managed.
Fortunately, BWP Trust appears to be in a good niche market with some strong tenants. I wouldn't bank on meaningful growth from the business over the next five years and hence would not buy BWP shares today. But current holders could hold tight and enjoy the regular income.