The HomeCo (ASX:HDN) share price moving higher on valuation update

The HomeCo share price is gaining in morning trade. We look at the latest project and valuation update from the ASX listed REIT.

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The HomeCo Daily Needs REIT (ASX: HDN) share price is gaining in morning trade, up 1%.

The real estate investment trust (REIT) invests in convenience-based assets such as retail and health & services.

Below we look at the company’s latest projects and valuation updates.

What did HomeCo report this morning?

HomeCo’s share price is moving higher after the REIT reported a 6.5% increase in its preliminary June 2021 valuation to $84.7 million. Net of capex, the unaudited valuations increased 4.7% to $61.1 million.

Of the REIT’s 27 properties, 23 were completed by independent valuation, while the remaining 4 properties were completed by internal valuation.

Commenting on the valuation increase HomeCo fund portfolio manager Paul Doherty said:

The draft valuation result provides strong validation for HDN’s high quality and well-located portfolio which is benefitting from robust investment and tenant demand. Incorporating the preliminary unaudited valuations and capital raising announced in April 2021, HDN’s gearing will reduce to the bottom end of the target 30-40% range, providing significant capacity for future investment in growth initiatives.

HomeCo also reported that both its major development projects are now largely complete. Richlands, in Queensland, commenced trading in March and has an occupancy of 95%. Ellenbrook, in Western Australia, has a current occupancy rate of 93%.

The REIT said its 5 brownfield developments have made substantial progress and it forecasts an average cash yield of at least 10% once the assets are fully stabilised. The company is continuing to look for further potential acquisitions in the market.

Looking ahead, HomeCo reaffirmed its 2021 financial year guidance of 3.9 cents per share, with a fourth quarter distribution of 1.8 cents per share. The REIT’s 2022 financial year guidance was reaffirmed to be at least 8.3 cents per share, up 24% from FY21.

HomeCo share price snapshot

Over the past 12 months, the HomeCo share price is up 3%. By comparison, the All Ordinaries Index (ASX: XAO) is up 25% in that same time.

Year-to-date the HomeCo share price has been gaining momentum, up 9% so far in 2021.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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