DXS
Noting the sale of 44 Market in Sydney, for a 17% discount to book.
The current NTA discount to the headstock is around 34%, which is pretty sizeable.
44 Market was at 85% occupancy, with a WALE of ~2.5.
DXS group occupancy is closer to 96%, with a longer WALE, so, selling an asset at a price discount that is less than the overall discount applied to the headstock is a good thing, at the margin, as is letting go of an asset that was struggling with its occupancy and near term rental reset pressure (the short WALE).
Our thesis with DXS is that the future for high quality office is much better than the apocalpyse that is priced into the shares.
Now, for some companies, particularly those with a) high gearing and b) older, less attractive assets, it really will be the end. There are a lot of zeroes out there.
But with DXS we think things should be okay. That yield of ~6.8% is pretty reasonable compensation, in a world in which management want staff to return to office, and where there is demand for good collaborative office space.
It’s definitely not a slam-dunk trade, it has hairs, and that’s why we are seeing the volatility. But in a diversified portfolio, we think it is a good risk-reward trade, and the asset sale is a better-than-expected outcome.
Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.
This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.
Please note that past performance is not a reliable indicator of future performance.
General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.
Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.