HomeCo Daily Needs REIT (ASX: HDN) released its FY24 results and FY25 guidance. The numbers were broadly in line with management guidance.
Let's see how the real estate investment trust performed during FY24.
FY24 results are largely in line with the guidance
Key numbers from HomeCo Daily Needs REIT are as follows.
- Property net operating income (NOI) increased by $11.6 million to $272.9 million.
- Funds from operations (FFO) increased slightly from $177.1 million in FY23 to $178.1 million in FY24, equivalent to 8.6 cents per unit, in line with management guidance.
- The company announced a distribution of 8.3 cents per unit, in line with guidance.
- Net tangible assets (NTA) in June 2024 was $1.44, in line with its December 2023 value, despite a capitalisation rate increase.
- Gearing remains modest at 35.1%, within its target range of 30% to 40%.
HomeCo Daily Needs acquired $293 million of assets in FY24, focusing on high-growth metropolitan locations. The company applied a target return on invested capital (ROIC) of approximately 7% to these acquisitions.
What did management say?
CEO Sid Sharma highlighted the company's portfolio strategy, including active capital recycling, as the reason for resilient business performance in FY24. He said,
The strong set of FY24 results reflect our strategically located metropolitan assets which have limited exposure to cyclical and discretionary retail expenditure.
HDN continues to benefit from portfolio occupancy of over 99%, collect over 99% of billed rent, and maintain sector-leading positive re-leasing spreads of 6.0%.
He added that strong net operating income across the portfolio supports asset values despite a modest easing in capitalisation rates.
The company also seeks to grow its asset base. HomeCo Daily Needs fund manager Paul Doherty highlighted the company's low gearing, which he believes provides a solid platform for undertaking asset recycling and organic growth.
2.4% growth in dividends guided for FY25
HomeCo Daily Needs anticipates stable earnings growth for the new financial year. The company guided for a 2.3% growth in its FFO to 8.8 cents per unit.
This growth will flow down to its distribution, which management aims to increase by 2.4% to 8.5 cents per unit. This indicates a distribution yield of 6.8%, which appears attractive.
HomeCo Daily Needs securities are valued at a 14% discount to its NTA.
