Dexus: We Remove Moat Rating and Cut Fair Value Estimate by 9% Following Transfer of Coverage

We lower our fair value estimate for Dexus by 9% to AUD 9.60 per security as we transfer coverage to a new analyst. The cut is mainly driven by a change in our weighted average cost of capital assumption, now 7%, and in line with similar Australian REITs under our coverage, from 6.8%. Another key driver is our revised estimate on the value of Dexus’ hedged debts based on the most recent fiscal year-end data. As of June 30, 2024, 92% of the debts are hedged, with a weighted average interest rate of 2%. We assume the June 30 cost of debt of 4.1% will gradually rise to our long-term cost of debt assumption of 5.8% as debt hedges roll off.