Picton Property Income Ltd (LON:PCTN) had a good half year, maintaining a high level of occupancy and income, generating year-on-year growth in EPRA earnings and dividends, and reducing gearing further. The portfolio is strongly biased towards the better-performing industrial and regional office property markets and offers significant reversionary potential. Entry to the UK REIT regime will avoid negative effects from recent UK tax law changes, while the change in its listing status to that of a commercial company, from an investment company, improves administrative flexibility.
H119: 3.9% total return
H119 EPRA EPS increased c 9% compared with H118, to 2.2p, and covered aggregate dividends per share of 1.75p (+3% y-o-y) by a healthy 1.25x. The portfolio performed well, outperforming the MSCI IPD Quarterly Benchmark on both an income and ungeared total return basis, which it has now done over one, three, five and 10 years. Occupancy was maintained at a good level of 94% (MSCI IPD Quarterly Digest 92%), but lower than the 96% in March, primarily due to planned asset management activity. Like-for-like valuation gains of 1.5% during the period contributed to the increase in EPRA NAV per share to 92p (March: 90p), taking NAV total return (including DPS paid) to 3.9%. The moderate gearing reduced further, to an LTV of 25.5%. Our DPS forecasts remain unchanged, but we have trimmed our near-term income expectation due to the asset management activities and the impact of retailer stress, albeit affecting a small part of Picton’s portfolio.
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