This ASX Bunnings property share is falling on its half year results

This property company reported a sizeable decline in profits during the first half but maintained its dividend…

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Key points

  • BWP has released its half year results on Wednesday
  • It reported a large drop in its earnings for the period
  • However, the Bunnings property owner has maintained its interim dividend

The BWP Trust (ASX: BWP) share price has dropped into the red on Wednesday morning.

At the time of writing, the Bunnings-focused commercial property company's shares are down 1% to $3.88.

This follows the release of the BWP's half year results this morning.

BWP share price falls on half-year results

  • Revenue up 4% to $78.63 million
  • Profit before investment property gains up 2% to $57.4 million
  • Gains in fair value of investment properties down 82% to $53.9 million
  • Profit after tax down 68% to $111.3 million
  • Interim distribution flat at 9.02 cents per share

What happened during the half?

For the six months ended 31 December, BWP reported a 4% increase in revenue to $78.63 million. This was underpinned by a 3.9% increase in like-for-lie rental growth and an occupancy rate of 97.5%.

And while its overall profit was down heavily on the prior corresponding period, this was due to major gains in the fair value of investment properties in FY 2022. Pleasingly, profit before these gains was up year over year to $57.4 million.

This allowed the BWP board to maintain its interim distribution at 9.02 cents per share.

The company also revealed that its entire investment property portfolio was revalued during the half. Following the revaluations, the company's weighted average capitalisation rate was 5.05%, which is up a fraction from 5.04% at the end of June.

One slight negative, though, is that BWP's portfolio now has a weighted average lease expiry of 3.6 years. This is down from 3.9 years in June and 4.3 years 12 months ago. Though, it is worth noting that the company has options it can exercise to extend Bunnings leases.

Outlook

Management appears positive on the company's prospects in the second half. This is due to rent reviews, which are expected to contribute incrementally to property income for the second half.

It notes that there are 45 leases to be reviewed to the CPI or by a fixed percentage increase during the period. There are also four market rent reviews of Bunnings Warehouses that remain unresolved and are in the process of being finalised.

Outside this, management's main focus will be on filling any vacancies in the portfolio, progressing store upgrades, re-zonings, and extending Bunnings leases through the exercise of options. It will also continue to look for opportunities to acquire assets where there is good potential for value creation.

Subject to there being no major disruption of the Australian economy, BWP expects to pay a full year distribution in-line with what was paid in FY 2022 (18.3 cents per share).

Motley Fool contributor James Mickleboro 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.

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