GPT’s Office Shines and Retail Muddles Through. FVE Falls to AUD 5.00

Narrow-moat GPT Group’s fiscal 2017 earnings on a funds from operations, or FFO, basis, of AUD 30.8 cents per security, or cps, increased 3% on fiscal 2016 and was in line with guidance. The retail and office divisions both reported solid operating metrics, logistics was broadly flat, while funds management was down as expected given the prior year featured a material performance fee. Following a trim to retail rental growth expectations and a slightly higher capital expenditure outlook, our fair value estimate for GPT Group declines to AUD 5.00 from AUD 5.20. With GPT trading around AUD 4.85, the stock screens as undervalued, with the estimated distribution representing a yield of 5.2%.