APN Convenience Retail REIT fund manager Chris Brockett attributed the premium that investors have placed on its securities to the appeal of the asset class and the hunt for “good yielding stock”.
Its shares rose 9¢, or 2.3 per cent, to a new high of $3.97 on Wednesday, after the owner of 72 petrol and convenience centres reported a 6.7 per cent rise in earnings for the December half year and re-affirmed its full-year earnings and distribution guidance.
Forty-six of the trust’s 72 petrol stations are leased to Puma.
Tuesday’s gain means the property trust’s shares are trading at a 27 per cent premium to their net tangible asset (NTA) backing of $3.13 as of December 30.
The stock, which trades on a distribution yield of about 5.4 per cent, has closed the gap on its much bigger rival, VIVA Energy REIT, which trades on a yield of about 4.9 per cent.
“We have seen it across the board, except for the retail property stocks. Investors are chasing yield,” Mr Brockett told The Australian Financial Review.
“A good-yielding stock can provide a secure, stable and growing income stream.”
A highlight of the half year was the trust completing its first big equity raising of $46.5 million, to fund a $75 million portfolio of 13 petrol stations.
“There is plenty of equity demand for my fund and other [similar] funds at the moment,” Mr Brockett said.
The acquisition lifted the weighted average lease expiry across the $390 million portfolio to 11 years.
The portfolio is fully leased with 97 per cent of its income coming from major service station tenants.
With portfolios hard to come by amid strong appetite from self-managed superfunds for the asset class, Mr Brockett said the trust would look to leverage off its partnerships with its tenant and developers to grow the portfolio.
Its biggest tenant, Puma Energy (also a substantial shareholder in the trust), leases 46 of the trust’s properties and accounts for 63 per cent of its rental income.
Puma agreed to sell its Australian business to global energy giant Chevron in December. AQR said transfer of lease control from Puma to Chevron was underway.
While the growing use of electric cars would impact the sector “at some point in the future”, Mr Brockett said it was not a near term issue with tenants adjusting “the way they do things” to drive more profits from their shop sales.
“You’ve seen BP align with David Jones and Caltex go into a new concept partnership with Woolworths. These changes are part of the evolution of the asset class over the next 10 to 15 years,” he said.
“The pure impact of electric vehicles on petrol stations won’t occur for a long time.”
According to the Electric Vehicle Council, sales of electric cars tripled last year to 6718 vehicles. But this only represents 0.6 per cent of total vehicle sales.