GPT Group (GPT)

By Jason Fittler

GPT has a high-quality portfolio of CBD office towers and regional shopping centers spread across Australia, predominantly leased to strong tenants with low default risk.

If you are investing for income and capable of bearing some capital risk then take a look at this stock.

Like all stocks in the property sector it is not with out its risks right now. The key risks to this stock is of course, gearing covenant, increase in vacancy rates and refinancing issues.

GPT has successfully under taken capital raising which will continue to strengthen their position. They have also provided guidance for 2009 indicating an operating income of $347m, which we consider may be exceeded and forecast a distribution of 7.2cpu.

We are expecting to see short-to-medium term deterioration on occupancy rates and rental income in the office, retail and industrial portfolios. We also expect to see development profit and funds management fees reduce.

Our valuation off to $0.85 is a 40% discount to Net Assets and provides a forecast distribution yield of 8.5% based on management guidance.

Our recommendation is maintained as BUY, though GPT should only be considered by income investors willing to bear some capital risk in the short term. Significantly less now given the extreme falls already suffered. Key catalyst include: asset sales and successful debt refinancing.

If you would like more information on the GPT Group (GPT) please give us a call on (07) 4771 4577.