Another Soft Year for BWP’s Earnings but Property Values Are Soaring

Narrow-moat BWP Trust's fiscal 2021 adjusted net profit fell 3% to AUD 114 million, or AUD 17.8 cents per unit. But distributions were kept flat at AUD 18.3 cpu, supported by a small amount of debt. The main issue continues to be Bunnings vacating older stores when leases expire, which offsets rental growth elsewhere in the portfolio. Disappointingly, distribution guidance is for AUD 18.3 cpu again in fiscal 2022. But distribution growth should improve in the medium term as higher CPI-linked rent growth starts to offset Bunnings vacancies. The fiscal 2021 result and 2022 guidance were marginally below our prior expectations. We downgrade our 2022 profit and distribution forecasts by about 3% but our longer-term forecasts and AUD 3.60 fair value estimate are unchanged. The stock screens as slightly overvalued at present.