GPT (ASX:GPT) share price rallies 3% on FY21 earnings

Shares in the diversified REIT are pushing higher this afternoon. Here’s why.

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Buying activity has picked up for the GPT Group (ASX: GPT) share price after the company released its half-year results.

At the time of writing, the real estate investment trust (REIT)‘s share price is up 3.65% to $4.83.

GPT share price rallies on strong first half recovery

GPT delivered a well-rounded result for the six months to 30 June 2021, supported by minimal disruptions from COVID-19 and a robust recovery in retail sales.

  • Net profit after tax (NPAT) of $760.5 million compared to a net less after tax of $520.4 million in June 2020
  • Funds from operations (FFO) of $302.3 million or FFO per share of 15.64 cents, a 24.6% increase on the prior corresponding period (pcp)
  • Interim dividend of 13.3 cents per share, a 43% increase on pcp
  • Retail rent collection rate 104% of 1H 2021 net billings
  • Total centre sales up 5.0% and total specialties sales up 6.5% compared to the same period in 2019

What did GPT achieve in 1H 2021?

Investors are bidding the GPT share price higher on Monday after the company cited strong momentum in the six months to 30 June 2021.

The company was pleased to advise that its investment properties received a revaluation gain of 3.3% or $471.7 million.

GPT’s logistics portfolio was a standout performer, recording a $314.7 million or 10.6% valuation gain. Occupancy for its logistics portfolio was 96.8% with rent collections for the first half representing 100% of net billings.

The office portfolio recorded a valuation increase of $121.2 million or 2.2%, reflecting “strong investor demand and transactions”. The company advised that occupancy for its $5.8 billion prime grade office portfolio was 88.9% at 30 June 2021. Pleasingly, rent collections for the first half were 100% of net billings.

Commenting on the office real estate landscape, the company said:

In the first half of 2021, positive indicators of strong jobs growth supported by rising business confidence, led to stronger tenant enquiry. While this has been interrupted by the reimposition of Government restrictions, GPT expects the positive momentum of the first half to re-emerge as restrictions unwind.

GPT’s retail portfolio valuations eked out a gain of $35.8 million or 0.6%. The company said that retail sales were showing strong signs of recovering after the easing of COVID-19 restrictions at the beginning of the period.

The company advised that while Victorian assets rebounded strongly in the second quarter, they have been impacted by further government lockdowns and ongoing restrictions at the end of the half.

It said that “… given the asset’s location in the Melbourne CBD, it is heavily reliant on foot traffic from office workers, students and tourists, resulting in a slower recovery compared to the rest of the portfolio”.

What did management say?

In response to the interim results, GPT CEO Bob Johnston said:

Over the first half of 2021, our Logistics portfolio continued to grow through developments and acquisitions, and we advanced commitments with our strategic partner QuadReal Property Group. We successfully completed Office developments at 32 Smith and Queen & Collins. Further, we experienced a rebound in retail sales and retail rent collections were high. Our balance sheet and liquidity position remained strong, with A and A2 investment-grade credit ratings from S&P and Moody’s respectively.

Johnston also commented on the recent lockdowns, saying:

While the recent COVID-19 outbreaks have disrupted the economic recovery, we expect this to be transitory and that we will see a return to favourable business conditions once vaccination rates reach a level that allow restrictions to be lifted on a more sustained basis.

GPT share price in FY21

The GPT share price has rallied strongly on Monday, currently 3.0% higher to $4.80.

GPT acknowledged that COVID-19 restrictions will continue to disrupt the Australian economy and the company’s operating environment.

While recent restrictions have disrupted the company’s recovery, it expects this to be temporary and favourable conditions will return once restrictions are lifted.

GPT cited the logistics space as a key opportunity with “unprecedented levels of investment demand”. The company said that it is “well positioned to capture this opportunity with $1.4 billion in [its] logistics development pipeline”.

On the flip side, it said office leasing “remains challenging with elevated vacancy rates and new supply emerging” but the company remains optimistic that conditions will improve once CBDs re-open.

Despite the mixed results, the GPT share price will be paying a solid interim dividend of 13.3 cents.

The interim dividend alone represents a yield of 2.7% at today’s prices.

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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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