Afternoon Report / Buyer emerges for Sydney office space (DXS)

By Market Matters 24 June 20

Buyer emerges for Sydney office space (DXS)

Market Matters Afternoon Report 24th June 2020

WHAT MATTERED TODAY

A choppy day today with the index knocking on the door of 6000 for now the 6th straight session but once again failing to move meaningfully higher. Utilities were strong, with gas infrastructure company APA announcing they expect to meet previous dividend guidance of 50c/share for the full year. CSL closed at its best level in 3 weeks to see healthcare higher. Materials were also strong with both gold and iron ore names catching a bid – both commodities moving higher together is rare, and its unlikely to last. TPG-Vodafone merger received shareholder approval today with very little resistance from the owners, the final hurdle to jump is the NSW court hearing on Friday this week.

Overall, the ASX 200 added +11pts / 0.19% today to close at 5965 - Dow Futures are trading up +38pts/0.15%

ASX 200 Chart

ASX 200 Chart

CATCHING MY EYE:

Dexus (DXS) +0.90%: property manager Dexus is poised to sell one of their prime Sydney office blocks for $530m. Singapore’s Peakstone approached Dexus with an offer for 45 Clarence Street in line with the carry value seen at the half year result which was enough for the current owner to take notice. The deal will still require FIRB approval, while when the money lands it will be used to pay down some debt. What caught my eye was the keen buyer despite the uncertainty – particularly around office space in a rapidly evolving work environment. In an afternoon release, Dexus announced it had undertaken external valuations of 90% of its assets with the book value falling just 1.2%. CEO Darren Steinberg said it highlighted the resilience of the book, particularly given book values actually increased in the industrial portion. The operating environment seems hazy for the medium term as companies re-work office requirements for staff, but for the moment, land still has a buyer. We are cautious the space for the moment, though DXS is fairly priced at around 0.9x book value.

Dexus (DXS) Chart

BROKER MOVES:

·         Qube Cut to Neutral at Citi; PT A$3.15

·         Transurban Cut to Neutral at UBS; PT A$14.85

·         Appen Rated New Outperform at Macquarie; PT A$38

·         Premier Investments Cut to Sell at Morningstar

·         Western Areas Raised to Overweight at JPMorgan; PT A$3.30

·         Qube Cut to Reduce at Morgans Financial Limited; PT A$2.45

·         SCA Property Cut to Hold at Jefferies; PT A$2.23

·         Qube Cut to Hold at Jefferies; PT A$2.83

·         Altium Cut to Lighten at Ord Minnett; PT A$29.50

OUR CALLS

No changes today

Major Movers Today

Have a great night

Harry & the Market Matters Team

Disclosure

Market Matters may hold stocks mentioned in this report. Subscribers can view a full list of holdings on the website by clicking here. Positions are updated each Friday, or after the session when positions are traded.

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