HomeCo share price slides despite 970% profit boost

The REIT's share price is lower today despite a significant earnings increase.

| More on:
A surprised man sits at his desk in his study staring at his computer screen with his hands up.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • HomeCo reported its earnings for FY22 this morning and made significant profits, although the market has not responded accordingly
  • The REIT integrated its Aventus merger into its operations
  • It also beat guidance estimates across its key financial metrics

The HomeCo Daily Needs REIT (ASX: HDN) share price is in the red today despite the company reporting a massive rise in profit for the 2022 financial year (FY22) this morning.

Shares of the real estate investment trust (REIT) are currently trading for $1.28 each, a fall of 3.03% on Wednesday's closing price.

HomeCo describes itself as a property company that invests in convenience-based assets across target sub-sectors of neighbourhood retail, large format retail, and health and services.

Let's go over the key metrics of its financial report.

What did HomeCo report?

Highlights from HomeCo's FY22 results include:

  • Revenue from ordinary activities up 338.7% year-on-year (YoY) to $198.3 million
  • Profit from ordinary activities up 970.6% YoY to $335.1 million
  • Earnings before interest, taxes, depreciation, and amortisation (EBITDA) up 368.65% YoY to $125.6 million
  • Funds from operations (FFO) up 30% YoY to $105.6 million or 8.85 cash distribution per unit (CPU)
  • Distribution per unit (DPU) of 8.28 CPU, up 18% YoY

HomeCo said its growth in earnings is reflected in its recent acquisitions and developments, as well as the merger with Aventus, which it completed in March this year.

The Aventus merger will reportedly unlock $500 million for its property pipeline in the future.

The company made six acquisitions in 2022 worth $2.64 billion.

With the new acquisitions and mergers, HomeCo has a $4.6 billion property portfolio. The portfolio reportedly performs strongly with a 99% occupancy and 99% cash collection in FY22.

What else happened in FY22?

The merger with Aventus and acquisitions saw net assets increase in FY22 by 165.21% to $3.137 billion.

HomeCo joined the S&P/ASX 200 Index (ASX: XJO) in April 2022.

The company also updated investors on its environmental, social, and governance (ESG) policies, with a net-zero emissions target for FY28.

What did management say?

Commenting on the FY22 results, HomeCo Chair Simon Shakesheff said:

Today's result builds on HDN's strong track record since listing in November 2020 … The transformational merger with Aventus has been successfully integrated and the management team has maintained strong operational momentum with over 99% occupancy and 99% rent collection in FY22.

The management team is capitalising on HDN's enhanced portfolio scale to drive rental growth in a higher inflation and interest rate environment as demonstrated by positive leasing spreads of +5.7% and comparable NOI growth of +5.1%.

How did Homeco's performance compare with expectations?

HomeCo reported that it either met or exceeded previous guidance estimates across its key financial metrics.

The company's FFO of 8.85CPU exceeded the guidance of 8.8CPU. Its DPU was also in line with expectations.

What's next?

HomeCo gave guidance for the rest of this year. The company expects an 8.6CPU with a DPU guidance of 8.3 cents. The expected DPU reflects a 97% payout ratio.

Moving forward, the company will focus on its development pipeline that's helped by a 30.6% pro forma gearing, which is at the bottom of its 30% to 40% target gearing range.

Some $75 million worth of developments is expected to be delivered in FY23 with a 7% return on invested capital (ROIC).

HomeCo share price snapshot

The HomeCo share price is currently down 17.5% year to date.

Meanwhile, the S&P/ASX 200 A-REIT Index (ASX: XPJ) is down 19% over the same period.

HomeCo has a market capitalisation of $2.73 billion. 

Motley Fool contributor Matthew Farley 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 Scott Phillips.

More on Earnings Results

Miner looking at a tablet.
Earnings Results

Rio Tinto share price on watch following FY 2023 earnings miss

Rio Tinto's iron ore operations were on form in 2023. It's a shame the rest of the business wasn't.

Read more »

Man with rocket wings which have flames coming out of them.
Earnings Results

4 All Ords ASX dividend shares going gangbusters on results

All Ords investors are sending these ASX dividend shares soaring on the back of their earnings results.

Read more »

Man waiting for his flight and looking at his phone.
Earnings Results

Corporate Travel share price plunges 18% despite tripling net profits

An explosion in earnings is taking a backseat to changes in Corporate Travel Management's full-year forecasts.

Read more »

happy woman throws arms in the air
Bank Shares

NAB shares hit 52-week high on first-quarter earnings beat

NAB appears on track to at least deliver on first-half expectations.

Read more »

A man wearing a shirt, tie and hard hat sits in an office and marks dates in his diary.
Earnings Results

Santos share price slips on 42% profit drop in FY23 result

Profits come back down to Earth in FY23.

Read more »

a man sits on a ridge high above a large city full of high rise buildings as though he is thinking, contemplating the vista below.

Here are 4 ASX 200 REITs results catching the eye on Wednesday

A mixed set of results have been announced by these property companies.

Read more »

Three analysts look at tech options on a wall screen
Earnings Results

WiseTech share price leaps 8% today as revenues surge

ASX 200 investors are bidding up the WiseTech share price today.

Read more »

Two parents and two children happily eat pizza in their kitchen as a top broker predicts a 46% upside for the Domino's share price
Earnings Results

Domino's share price charges higher on improving outlook

Here's how this struggling pizza chain operator performed during the first half.

Read more »