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Daily ShareChat: Kiwi Income Property Trust

By Jenny Ruth

Tuesday 23rd November 2010

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 Jenny Ruth

Kiwi Income Property Trust has a high-quality portfolio of assets and a very solid balance sheet but it faces further headwinds both in the office and retail markets over the next six to 12 months, says Buffy Gill, an analyst at Goldman Sachs & Partners New Zealand.

"In addition, the stock looks fully valued once tax changes come into play. We would need to see retail or office rents recover faster than we are forecasting or management being able to lease up vacant space ahead of expectations in order to revise this view,"Gill says.

The trust's underlying rentals weakened in the six months ended September with office rentals on a like-for-like basis down 2.6% and retail rentals down 1.3%, she says.

"The retail environment is still very tough, in our view, particularly at a top-line sales level. We would therefore expect to see further weakness in the retail portfolio as the remainder of leases are rolled over in the next six to 12 months."

In the Auckland office market, occupancy continues to be "challenging" with excess capacity and new builds not expected to clear for the next few years. Against her expectations, the Christchurch PricewaterhouseCoopers centre is also proving difficult to refill, Gill says.

Recommendation: Hold.

DISCLAIMER: To the extent that any of the content above constitutes advice, it is general advice that has been prepared without reference to investor’s objectives, financial situation or needs. Before acting on any advice, investors should consider the appropriateness of the advice and IRG recommend that investors should obtain appropriate financial, legal and taxation advice before making any financial investment decision. The report is based on information compiled from public information and private research. IRG have completed the report on a best endeavours basis and do not accept any liability of loss or damage. IRG suggest that clients use this as part of a decision making process and check key data before making any investment decisions.
Employees may have an interest in the securities discussed in this report.



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