CMA focuses on investing in office and industrial assets in metropolitan markets across Australia. The Fund comprises Centuria Metropolitan REIT No. 1 and Centuria Metropolitan REIT No. 2, being two stapled registered managed investment schemes.
The Fund's portfolio comprises five office and three industrial assets with an independent valuation of $322.1 million, reflecting a weighted average capitalisation rate of 8.4% and an initial yield of 8.7%. CMA's Property portfolio - 3 Cariingford Rd, Epping NSW 44 Hampden Rd, 1 Richmond Rd, 9 Help St, 14 Mars Rd, 555 Coronation Dr, 149 Kerry Rd, 13 Femdell St, 35 Robina Town Ctr Dr, 54 Marcus Clarke St, 60 Marcus Clarke St. & 131-139 Grenfell St.
We are more confident CMA can execute around the two key areas of risk (1) Sale of Carlingford, Epping assets as a residential site, and (2) Lease up of vacancy in Canberra (occupancy 87% from 76%). CMA has lagged the rest of the sector, trading at a 4.2% discount to NTA ($2.05) and looks attractively priced on an 8.3% distribution yield.
CMA has largely alleviated a key concern of the Canberra vacancy, in a difficult market, CMA has increased Canberra occupancy to 87% from 74% since acquiring the two assets in April 2015. CMA's balance sheet looks solid at 32% gearing versus 50% covenant, 4.4yrs debt maturity. CMA is trading on an 8.6% distribution yield with 2.2% DPS growth in financial year 2016.
Currently trading at $2.08 we have a price target of $2.20 over the next 12 months, providing a 5% upside. Given the stock is trading at a discount this is a good opportunity for those looking to increase their exposure to property to build a holding. Note the dividend is not franked but is expecting to grow from $0.17 this year to $0.19 by 2020.