Analyst Note| Adrian Atkins |
We maintain our AUD 4.35 fair value estimate for no-moat-rated ALE Property Group after it sold six of its 86 pub properties for net proceeds of AUD 71 million. Yields on the sold properties were not much higher than ALE Property's average cost of debt, so the sales shouldn’t detract noticeably from earnings. The group also refinanced AUD 250 million of debt at a slightly lower interest rate, which we estimate saves about AUD 1 million per year, though this was expected and we had already partly factored it in. We incorporate the property sales and debt refinance into our DCF model, but profit forecasts are largely unchanged. We think ALE Property is fairly valued at present, offering a forecast 4.7% yield with distributions likely to grow at or slightly above CPI, underpinned by CPI-linked rental increases under long-term leases.