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ALE Property Group LEP

Rating as of

Morningstar’s Analysis

Valuation
Currency in AUD
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

ALE Sells Six Non-Core Pubs at High Prices; Financial Health Improves

Adrian Atkins Senior Equity Analyst

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.

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Company Profile

Business Description

ALE Property Group is an internally managed Australian real estate investment trust with a portfolio of 86 freehold pubs across Australia. It is a stapled entity comprising one trust and a company that acts as responsible entity. The portfolio is valued at more than AUD 1 billion: 48% in Victoria, 31% in Queensland, 14% in New South Wales, and small exposures to South Australia and Western Australia. All properties are leased to Australia’s largest pub operator, Endeavour Group.

Contact
6 O'Connell Street, Level 10, Norwich House
Sydney, NSW, 2000, Australia
T +61 282318588
Sector Real Estate
Industry REIT - Hotel & Motel
Most Recent Earnings
Fiscal Year End Jun 30, 2021
Stock Type
Employees 3

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