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Daily ShareChat: AMP Office Trust

By Jenny Ruth

Thursday 18th February 2010

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 Jenny Ruth

AMP Office Trust's 25% rise in pre-tax earnings to $37.7 million was solid, reflecting strong net rental growth, lower interest costs and lower management fees due to lower portfolio asset values, says McDouall Stuart.

The fall in after-tax earnings from 3.94 cents per unit in the first-half of 2009 to 3.22 cents in the latest half year is mostly due to last year's $192 million rights issue resulting in 310 new units.

While the trust has a high quality portfolio, occupancy has fallen to 90%. "The slippage in occupancy rate has arisen from the recently completed development at 21 Queen St where occupancy was only 4.5% in September with slow improvement since. Tenant enquiries are high but progress is slow," the broker says.

The trusts asset values also remain under pressure with rising unemployment affecting occupancy and rent reviews.

Directors are forecasting gross dividend growth of 2% a year but this could be affected by tax changes with a total elimination of depreciation adversely affecting distributable profit by 8% to 10% in the 2011 financial year.

"With strong headwinds from economic conditions affecting occupancy and rentals, slow uptake from the 21 Queen St development and possible tax changes in the Government's budget, the share price is unlikely to appreciate before the next quarterly result announcement."


BROKER CALL:  McDouall Stuart rate AMP Office Trust as hold.



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