Growthpoint Properties Australia
| Morningstar Rating for Stocks | Fair Value | Economic Moat | Capital Allocation |
|---|---|---|---|
| m.Z | LOCK|bL^ | LOCK|#MR#!> |
Growthpoint Earnings: Operating Conditions Solid, Debt and Interest Costs the Main Risk
Growthpoint’s property portfolio is performing robustly in the near term. But as existing fixed-rate debt expires, rising debt costs are weighing on Growthpoint’s earnings, probably until 2027 when most hedges will have expired. Growthpoint’s cost of debt was 4.7% for the first half of fiscal 2024, still below our estimated long-term cost of debt of 6.5%. Gearing of 40.5% is high. An interest cover of 2.9 times doesn’t impress, but it is comfortably above the 1.6 times covenant minimum. However, significantly higher debt costs and a decrease in property income could see Growthpoint flirting with covenants.
