Property for Industry Limited Analysis

Overview

Property for Industry Limited ("PFI") is an NZX listed property vehicle specialising in industrial property.

PFI's nationwide portfolio of more than 90 properties is leased to around 150 tenants.

PFI was formed in 1993, and has been listed on the NZX under the code "PFI" since December 1994.

Performance

The following information has been extracted from Property for Industry's half year results, released on 26 August 2024:

PFI has delivered a sound operating result evidencing the positive attributes of the Company’s strategic positioning within NZ’s industrial property market. Profit after tax of $21.2m is up $51.7m on the pcp and incorporates a fair value loss of $4.2m on the Company’s $2.1bn industrial property portfolio. Strong leasing outcomes and stable operating cash flows have supported a consistent dividend.

With PFI’s property valuations stabilising, and funding lines that have been renewed and extended, the outlook for the Company’s earnings and cash flows will be supported by capturing embedded growth within the portfolio as rents are reviewed and an interest rate environment that is forecast to improve[1].

Highlights

• FP24 result: Profit after tax of $21.2m, up $51.7m on the pcp, incorporating fair value losses on properties of $4.2m, as compared to losses of $55.0m in the pcp, Funds From Operations (FFO)[2] up 2.2% on the pcp to 5.03 cents per share (cps), Adjusted Funds From Operations (AFFO) down 0.9% on the pcp to 4.58 cps, FP24 cash dividends of 4.15 cps, consistent with FY23 dividends on an annualised basis, fully covered by AFFO and strong cash flows from operations.
• Portfolio under-renting[3] provides embedded growth: Industrial property portfolio valuation of ~$2.1bn has stabilised and is ~16% under-rented, $36.3m of contract rent reviewed during FP24 delivering an average annualised uplift of 5.7%, $5.9m of contract rent leased during FP24 at an average of 25.3% above previous contract rents.
• Green Star development pipeline advanced: Tenant commitment secured for Stage 2 of the redevelopment of 78 Springs Road, balance of 30-32 Bowden Road leased for a term of 12-years, active Green Star projects on track with ~$33m of committed spend remaining, opportunity to deploy ~$350m on Green Star development over the medium-term.
• Liquidity profile extended: $600m of facilities refinanced or established since December 2023, ~$300m of facility headroom following post-balance date refinancing, gearing comfortable at 32.9%, interest rate environment forecast to improve.

FP24 result

PFI reported a profit after tax for FP24 of $21.2m (profit of 4.22 cps), as compared to a loss of $30.5m (loss of 6.08 cps) in the pcp. A $4.2m fair value loss on the independent valuation of the Company’s property portfolio, as compared to a $55.0m fair value loss in the pcp, was the main contributor to this increase.