Custodian Property Income REIT plc: Interim Results - Revision history

155.198.14.213 at 15:13, 20 January 2023

2023-01-20T15:13:02Z

← Older revision		Revision as of 16:13, 20 January 2023
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	=== Dividends ===		=== Dividends ===
	Since the company's inception (i.e. eight years ago), the median dividend of the company is 1.57%, and the mean is 0.78%. We note that if the dividend grows in the current financial year (i.e. the year ending 31st March 2023) in-line with our forecast (i.e. 4.76%), then the median will increase to 1.59% and the mean to 1.28%.		Since the company's inception (i.e. eight years ago), the median dividend of the company is 1.57%, and the mean is 0.78%. We note that if the dividend grows in the current financial year (i.e. the year ending 31st March 2023) in-line with our forecast (i.e. 4.76%), then the median will increase to 1.59% and the mean to 1.28%. We note that if the company had grown its dividend at a constant/fixed rate during that period, then the rate would be 3.64%.
	{\| class="wikitable"		{\| class="wikitable"
	\|+Declared Custodian Property Income REIT plc dividends		\|+Declared Custodian Property Income REIT plc dividends

155.198.14.142 at 12:18, 5 January 2023

2023-01-05T12:18:18Z

← Older revision		Revision as of 13:18, 5 January 2023
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	!Interest cover (x)		!Interest cover (x)
	!Total debt/total capital		!Total debt/total capital
			!Adjusted beta
	\|-		\|-
	\|Custodian Property Income REIT plc		\|Custodian Property Income REIT plc
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	\|5.12		\|5.12
	\|20.57%		\|20.57%
			\|0.4230
	\|-		\|-
	\|Prs Reit Plc/The		\|Prs Reit Plc/The
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	\| --		\| --
	\|35.16%		\|35.16%
			\|0.598
	\|-		\|-
	\|Regional Reit Ltd		\|Regional Reit Ltd
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	\| --		\| --
	\|44.34%		\|44.34%
			\|0.838
	\|-		\|-
	\|Triple Point Social Housing		\|Triple Point Social Housing
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	\| --		\| --
	\|37.23%		\|37.23%
			\|0.633
	\|-		\|-
	\|Abrdn Property Income Trust		\|Abrdn Property Income Trust
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	\| --		\| --
	\|21.63%		\|21.63%
			\|0.478
	\|-		\|-
	\|Schroder Real Estate Investment Trust		\|Schroder Real Estate Investment Trust
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	\| --		\| --
	\|30.56%		\|30.56%
			\|0.700
	\|-		\|-
	\|Uk Commercial Property Reit		\|Uk Commercial Property Reit
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	\|41.73		\|41.73
	\|0.00%		\|0.00%
			\|0.562
	\|-		\|-
	\|Workspace Group Plc		\|Workspace Group Plc
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	\|2.98		\|2.98
	\|25.82%		\|25.82%
			\|1.006
	\|-		\|-
	\|Lxi Reit Plc		\|Lxi Reit Plc
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	\| --		\| --
	\|15.58%		\|15.58%
			\|0.615
	\|-		\|-
	\|Derwent London Plc		\|Derwent London Plc
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	\|3.79		\|3.79
	\|21.95%		\|21.95%
	\|-		\|0.814
	~~\|Nextensa~~
	~~\|Belgium~~
	~~\|514~~.~~41M~~
	~~\|<nowiki>--</nowiki>~~
	~~\|5.17%~~
	~~\|5.76~~
	~~\|54.35%~~
	\|}		\|}

2.28.124.37 at 12:21, 3 January 2023

2023-01-03T12:21:44Z

@@ Line 342: / Line 342: @@
 |+Condensed consolidated statement of comprehensive income
+!
-!Unaudited
+!Unaudited 6 months to 30th September 2022
+!Unaudited 6 months to 30th September 2021
-months
+!Audited 12 months to 31st March 2022
 |-
+|
@@ Line 510: / Line 496: @@
 |+Condensed consolidated statement of financial position
+!
-!Unaudited
+!Unaudited 30th September 2022
+!Unaudited 30th September 2021
-Sept
+!Audited 31st March 2022
 |-
+|
@@ Line 667: / Line 641: @@
 |+Condensed consolidated statement of cash flows
+!
-!Unaudited
+!Unaudited 6 months to 30th September 2022
+!Unaudited 6 months to 30th September 2021
-months
+!Audited 12 months to 31st March 2022
 |-
+|

95.149.161.208 at 12:28, 18 December 2022

2022-12-18T12:28:41Z

← Older revision		Revision as of 13:28, 18 December 2022
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	== Name change ==		== Name change ==
	On the 7th December 2022, the company ~~has~~ announced that to better reflect the main objective/mission of the company, it has changed its name to Custodian Property Income REIT plc, from Custodian REIT plc.<ref>https://www.investegate.co.uk/custodian-reit-plc--crei-/eqs/change-of-name/20221207070007ERINE/</ref>		On the 7th December 2022, the company announced that to better reflect the main objective/mission of the company, it has changed its name to Custodian Property Income REIT plc, from Custodian REIT plc.<ref>https://www.investegate.co.uk/custodian-reit-plc--crei-/eqs/change-of-name/20221207070007ERINE/</ref>

	The objective of the company is to generate income returns for shareholders.		The objective of the company is to generate income returns for shareholders.

95.149.161.208 at 12:22, 18 December 2022

2022-12-18T12:22:10Z

← Older revision		Revision as of 13:22, 18 December 2022
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	In comparison to the same period a year earlier, dividend increased by 10% to 2.75p per share (H1 FY21: 2.5p), and we note that they are fully covered by earnings (103%). The company reiterated that its target dividend amount for the financial year (i.e. 12-months ending 31 March 2023) is 5.5p or more, which equates to a 4.76% or more increase on a year earlier.		In comparison to the same period a year earlier, dividend increased by 10% to 2.75p per share (H1 FY21: 2.5p), and we note that they are fully covered by earnings (103%). The company reiterated that its target dividend amount for the financial year (i.e. 12-months ending 31 March 2023) is 5.5p or more, which equates to a 4.76% or more increase on a year earlier.

	~~---~~		EPRA earnings, which is intended to provide a common baseline measure for performance that is relevant to investors in investment property companies<ref>EPRA Earnings is a measure of the underlying operating performance of an investment property company excluding fair value gains, investment property disposals and limited other items that are not considered to be part of the core activity of an investment property company. It has its basis firmly in IFRS earnings (operational earnings) with limited specific adjustments. It therefore does provide a measure of recurring income, but does not, for example, exclude ‘exceptional’ items that are part of IFRS earnings. EPRA Earnings is intended to provide a common baseline measure for performance that is relevant to investors in investment property companies. To ensure that all adjustments reflect the net result to the parent company’s shareholders taxes and minority interests in respect of all adjustments are also taken out.</ref>, decreased by 6.7% to 2.8p per share (H1 2021: 3.0p), mainly due to administrative cost inflation, rising interest rates and additional ESG compliance costs.

	EPRA earnings<ref>EPRA Earnings is a measure of the underlying operating performance of an investment property company excluding fair value gains, investment property disposals and limited other items that are not considered to be part of the core activity of an investment property company. It has its basis firmly in IFRS earnings (operational earnings) with limited specific adjustments. It therefore does provide a measure of recurring income, but does not, for example, exclude ‘exceptional’ items that are part of IFRS earnings. EPRA Earnings is intended to provide a common baseline measure for performance that is relevant to investors in investment property companies. To ensure that all adjustments reflect the net result to the parent company’s shareholders taxes and minority interests in respect of all adjustments are also taken out.</ref> per share for the period decreased by 6.7% to 2.8p (H1 2021: 3.0p), mainly due to administrative cost inflation, rising interest rates and additional ESG compliance costs.		Fixed rate agreed debt facilities increased from 61% to 74%, significantly mitigating interest rate risk. The company's loan-to-value (LTV) increased to 25.5% as at 30th September 2022, and decreased by 1.5 percentage points to 24.0% post period end. We note that the LTV is in-line with that the targets detailed in the company's investment policy, which is maximum value of no more than 35% and medium-term net gearing target of 25%. The weighted average term of drawn debt is 6.3 years, the average cost of debt is 3.5% and there is no debt facilities maturing until September 2024.

	Fixed rate agreed debt facilities increased from 61% to 74%, significantly mitigating interest rate risk ~~and maintaining a beneficial margin between the aggregate cost of debt of 3~~.~~5% and income returns from the property portfolio~~

	~~Custodian Property Income REIT’s~~ loan-to-value at 30th September 2022 ~~of 25~~.5~~% now stands at~~ 24.0% ~~following~~ post period end ~~sales~~. Of the ~~Company’s £178m~~ of ~~drawn debt facilities 79~~% ~~is at fixed rates~~ of ~~interest and the balance is drawn on a variable rate revolving credit facility~~. The weighted average term of drawn debt is 6.3 years ~~and~~ the average cost of debt is 3.5%~~. Thanks to a strong balance sheet with significant covenant headroom~~ and no debt ~~facility~~ maturing until September 2024 ~~the Company is under no pressure to sell and the relatively low cost of debt should remain accretive to earnings through this phase of market turbulence.~~

	~~The Company may use gearing provided that the maximum LTV shall not exceed 35%, with a medium-term net gearing target of 25% LTV~~.

	== Name change ==		== Name change ==
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	As with any investment, investing in Custodian Property Income REIT carries a level of risk. Overall, based on the company's market beta<ref>Research shows that an investment has two main types of risks: 1) non-systematic and 2) systematic. Systematic risk is the risk related to the overall market, and non-systematic risk is the risk that's specific to an individual investment. Evidence shows that taking on non-systematic risk is inefficient, and it's, therefore, best to eliminate it; and in most cases, elimination is fairy easy to do [by holding a diversified portfolio of investments (i.e. around 15 investments)]. Accordingly, when assessing the riskiness of an investment, it’s best to look at the systematic risk only (i.e. ignore the non-systematic risk). A key measure of systematic risk is beta, and a main way to determine the riskiness of an investment is to compare the beta of the investment with the beta of the market, which is 1.</ref> (i.e. 0.426), the degree of risk associated with an investment in Custodian Property Income REIT is relatively 'low'.		As with any investment, investing in Custodian Property Income REIT carries a level of risk. Overall, based on the company's market beta<ref>Research shows that an investment has two main types of risks: 1) non-systematic and 2) systematic. Systematic risk is the risk related to the overall market, and non-systematic risk is the risk that's specific to an individual investment. Evidence shows that taking on non-systematic risk is inefficient, and it's, therefore, best to eliminate it; and in most cases, elimination is fairy easy to do [by holding a diversified portfolio of investments (i.e. around 15 investments)]. Accordingly, when assessing the riskiness of an investment, it’s best to look at the systematic risk only (i.e. ignore the non-systematic risk). A key measure of systematic risk is beta, and a main way to determine the riskiness of an investment is to compare the beta of the investment with the beta of the market, which is 1.</ref> (i.e. 0.426), the degree of risk associated with an investment in Custodian Property Income REIT is relatively 'low'.

	Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice. The beta value in a future period has been found to be on average closer to the mean value of 1.0, and because valuation is forward looking, it is logical to adjust the raw beta so it more accurately predicts a future beta. In addition, here, a beta value of 0.5 or less ~~is considered to be 'low'~~. Further information about the beta ratings can be found in the appendix section of this report.		Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice. The beta value in a future period has been found to be on average closer to the mean value of 1.0, and because valuation is forward looking, it is logical to adjust the raw beta so it more accurately predicts a future beta. In addition, here, we have assumed that for an investment to be considered 'low' risk, it must have a beta value of 0.5 or less. Further information about the beta ratings can be found in the appendix section of this report.

	For us, currently, the biggest risk to the valuation of the company relates to macro-economic factors, in particular unexpected and sudden changes in inﬂation and interest rates movements.		For us, currently, the biggest risk to the valuation of the company relates to macro-economic factors, in particular unexpected and sudden changes in inﬂation and interest rates movements.
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	\|What is the expected constant growth rate in dividends?		\|What is the expected constant growth rate in dividends?
	\|1.57%		\|1.57%
	\|We note that the gross domestic product (GDP) growth rate in the last 20 years (2001 to 2022) is around 3% per year for the global economy, and around 2.25% for the United Kingdom. Since the company's inception (i.e. eight years ago), the median dividend of the company is 1.57%.		\|We note that the gross domestic product (GDP) growth rate in the last 20 years (2001 to 2022) is around 3% per year for the global economy, and around 2.25% for the United Kingdom. Since the company's inception (i.e. eight years ago), the median dividend of the company is 1.57%. Further information about the company's dividend pay-outs can be found in the appendix section of this report.
	\|-		\|-
	\|Which financial forecasts to use?		\|Which financial forecasts to use?
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	\|What's the current value of the company?		\|What's the current value of the company?
	\|91.70 pence per share		\|91.70 pence per share
	\|As at 16th December 2022, the current value of Custodian Property Income REIT plc is 97.70p per share.		\|As at 16th December 2022, the current value of Custodian Property Income REIT plc is 97.70p per share.<ref>https://www.londonstockexchange.com/stock/CREI/custodian-property-income-reit-plc/company-page</ref>
	\|-		\|-
	\|Which time period do you want to use to estimate the expected return?		\|Which time period do you want to use to estimate the expected return?
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	\|Risk-free rate (%)		\|Risk-free rate (%)
	\|3.488%		\|3.488%
	\|Here, the risk free rate is the US 30 year treasury bond, and is calculated as at 16th December 2022. Research suggests that for the risk-free rate, it's best to use one that has the same or similar maturity to the estimated remaining lifespan of the company. Here, we have assumed that the estimated lifespan of the company is perpetual, so we have used the longest maturity, which is 30 years.		\|Here, the risk free rate is the US 30 year treasury bond, and is calculated as at 16th December 2022.<ref>https://www.marketwatch.com/investing/bond/tmubmusd30y?countrycode=bx</ref> Research suggests that for the risk-free rate, it's best to use one that has the same or similar maturity to the estimated remaining lifespan of the company. Here, we have assumed that the estimated lifespan of the company is perpetual, so we have used the longest maturity, which is 30 years.
	\|-		\|-
	\|Beta		\|Beta
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	\|Equity risk premium (%)		\|Equity risk premium (%)
	\|5.26		\|5.26
	\|Here, the equity risk premium is in relation to the global region, and is calculated as at 1st January 2022 (<~~nowiki~~>https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ctryprem.html</~~nowiki~~>). Research suggests that for the region of equity risk premium, it's best to use one that is the same or similar to the region of the beta market portfolio. Here, the region of the beta market portfolio is the world/global, so we have used the world/global region for the equity risk premium.		\|Here, the equity risk premium is in relation to the global region, and is calculated as at 1st January 2022.<ref>https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ctryprem.html</ref> Research suggests that for the region of equity risk premium, it's best to use one that is the same or similar to the region of the beta market portfolio. Here, the region of the beta market portfolio is the world/global, so we have used the world/global region for the equity risk premium.
	\|-		\|-
	\|Cost of equity (%)		\|Cost of equity (%)

95.149.161.208 at 11:08, 18 December 2022

2022-12-18T11:08:15Z

← Older revision		Revision as of 12:08, 18 December 2022
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	\|Risk-free rate (%)		\|Risk-free rate (%)
	\|3.488%		\|3.488%
	\|Here, the risk free rate is the US 30 year treasury bond, and is calculated as at 16th December 2022. Research suggests that for the risk-free rate, it's best to use one that has the same or similar maturity to the estimated remaining lifespan of the company. So, ~~for example, if~~ the estimated ~~remaining~~ lifespan of the company is ~~30 years~~, ~~then for~~ the ~~risk-free rate~~, ~~it's best to use one that matures in~~ 30 years ~~from now~~.		\|Here, the risk free rate is the US 30 year treasury bond, and is calculated as at 16th December 2022. Research suggests that for the risk-free rate, it's best to use one that has the same or similar maturity to the estimated remaining lifespan of the company. Here, we have assumed that the estimated lifespan of the company is perpetual, so we have used the longest maturity, which is 30 years.
	\|-		\|-
	\|Beta		\|Beta
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	\|Equity risk premium (%)		\|Equity risk premium (%)
	\|5.26		\|5.26
	\|Here, the equity risk premium is in relation to the global region, and is calculated as at 1st January 2022 (<nowiki>https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ctryprem.html</nowiki>).		\|Here, the equity risk premium is in relation to the global region, and is calculated as at 1st January 2022 (<nowiki>https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ctryprem.html</nowiki>). Research suggests that for the region of equity risk premium, it's best to use one that is the same or similar to the region of the beta market portfolio. Here, the region of the beta market portfolio is the world/global, so we have used the world/global region for the equity risk premium.
	\|-		\|-
	\|Cost of equity (%)		\|Cost of equity (%)

95.149.161.208 at 10:57, 18 December 2022

2022-12-18T10:57:51Z

← Older revision		Revision as of 11:57, 18 December 2022
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	As with any investment, investing in Custodian Property Income REIT carries a level of risk. Overall, based on the company's market beta<ref>Research shows that an investment has two main types of risks: 1) non-systematic and 2) systematic. Systematic risk is the risk related to the overall market, and non-systematic risk is the risk that's specific to an individual investment. Evidence shows that taking on non-systematic risk is inefficient, and it's, therefore, best to eliminate it; and in most cases, elimination is fairy easy to do [by holding a diversified portfolio of investments (i.e. around 15 investments)]. Accordingly, when assessing the riskiness of an investment, it’s best to look at the systematic risk only (i.e. ignore the non-systematic risk). A key measure of systematic risk is beta, and a main way to determine the riskiness of an investment is to compare the beta of the investment with the beta of the market, which is 1.</ref> (i.e. 0.426), the degree of risk associated with an investment in Custodian Property Income REIT is relatively 'low'.		As with any investment, investing in Custodian Property Income REIT carries a level of risk. Overall, based on the company's market beta<ref>Research shows that an investment has two main types of risks: 1) non-systematic and 2) systematic. Systematic risk is the risk related to the overall market, and non-systematic risk is the risk that's specific to an individual investment. Evidence shows that taking on non-systematic risk is inefficient, and it's, therefore, best to eliminate it; and in most cases, elimination is fairy easy to do [by holding a diversified portfolio of investments (i.e. around 15 investments)]. Accordingly, when assessing the riskiness of an investment, it’s best to look at the systematic risk only (i.e. ignore the non-systematic risk). A key measure of systematic risk is beta, and a main way to determine the riskiness of an investment is to compare the beta of the investment with the beta of the market, which is 1.</ref> (i.e. 0.426), the degree of risk associated with an investment in Custodian Property Income REIT is relatively 'low'.

	Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice. The beta value in a future period has been found to be on average closer to the mean value of 1.0, and because valuation is forward looking, it is logical to adjust the raw beta so it more accurately predicts a future beta.		Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice. The beta value in a future period has been found to be on average closer to the mean value of 1.0, and because valuation is forward looking, it is logical to adjust the raw beta so it more accurately predicts a future beta. In addition, here, a beta value of 0.5 or less is considered to be 'low'. Further information about the beta ratings can be found in the appendix section of this report.

	For us, currently, the biggest risk to the valuation of the company relates to macro-economic factors, in particular unexpected and sudden changes in inﬂation and interest rates movements.		For us, currently, the biggest risk to the valuation of the company relates to macro-economic factors, in particular unexpected and sudden changes in inﬂation and interest rates movements.
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	\|Risk-free rate (%)		\|Risk-free rate (%)
	\|3.488%		\|3.488%
	\|Here, the risk free rate is the US 30 year treasury bond, and is calculated as at 16th December 2022.		\|Here, the risk free rate is the US 30 year treasury bond, and is calculated as at 16th December 2022. Research suggests that for the risk-free rate, it's best to use one that has the same or similar maturity to the estimated remaining lifespan of the company. So, for example, if the estimated remaining lifespan of the company is 30 years, then for the risk-free rate, it's best to use one that matures in 30 years from now.
	\|-		\|-
	\|Beta		\|Beta

95.149.161.208 at 10:45, 18 December 2022

2022-12-18T10:45:38Z

@@ Line 873: / Line 873: @@
 |37,139
 |11,624
 |}
 == References and notes ==

95.149.161.208 at 12:05, 17 December 2022

2022-12-17T12:05:44Z

← Older revision		Revision as of 13:05, 17 December 2022
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	*For us, the key highlight of the announcements is that the company has grown its dividends in the six months ended 30th September 2022, relative to the comparable period a year earlier, in-line with our expectations (of 10%).		*For us, the key highlight of the announcements is that the company has grown its dividends in the six months ended 30th September 2022, relative to the comparable period a year earlier, in-line with our expectations (of 10%).
	*Accordingly, we have maintained our forecasts.		*Accordingly, we have maintained our forecasts.
	*With the shares currently trading at 91.70p per share, we estimate that the expected return of an investment in Custodian Property Income REIT Plc over the next five-years is 53%, which equates to an annual return of 8.9%. In other words, an £100,000 investment in the company is expected to return ~~£153~~,000 in five-years from now.		*With the shares currently trading at 91.70p per share, we estimate that the expected return of an investment in Custodian Property Income REIT Plc over the next five-years is 62%, which equates to an annual return of 10.2%. In other words, an £100,000 investment in the company is expected to return £162,000 in five-years from now.
	*Assuming that a suitable return level in the five years is 50%, then an investment in the company is considered to be a 'suitable' one.		*Assuming that a suitable return level in the five years is 50%, then an investment in the company is considered to be a 'suitable' one.
	== Interims ==		== Interims ==
	On 14th December 2022, the company announced its 2022 interim results.		On 14th December 2022, the company announced its 2022 interim results.<ref>https://www.investegate.co.uk/custodian-property-income-reit/eqs/interim-results/20221214070021EKITI/</ref>

	For the six months ended 30th September 2022, revenue increased by 10.64% to £22.30mm (H1 FY21: £20.15mm), driven by income that is rechargeable to tenants. Adjusting for the rechargeable income, revenue increased by 1.67% to £19.59mm (H1 FY21: £19.27mm), entirely generated from rental income from the company's investment properties. As a result of a revaluation of investment property, the company swung to a net loss of £14.09mm (H1 FY21: positive £48.07mm).		For the six months ended 30th September 2022, revenue increased by 10.64% to £22.30mm (H1 FY21: £20.15mm), driven by income that is rechargeable to tenants. Adjusting for the rechargeable income, revenue increased by 1.67% to £19.59mm (H1 FY21: £19.27mm), entirely generated from rental income from the company's investment properties. As a result of a revaluation of investment property, the company swung to a net loss of £14.09mm (H1 FY21: positive £48.07mm).
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	== Name change ==		== Name change ==
	On the 7th December 2022, the company has announced that to better reflect the main objective/mission of the company, it has changed its name to Custodian Property Income REIT plc, from Custodian REIT plc.		On the 7th December 2022, the company has announced that to better reflect the main objective/mission of the company, it has changed its name to Custodian Property Income REIT plc, from Custodian REIT plc.<ref>https://www.investegate.co.uk/custodian-reit-plc--crei-/eqs/change-of-name/20221207070007ERINE/</ref>

	The objective of the company is to generate income returns for shareholders.		The objective of the company is to generate income returns for shareholders.
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	==== What's the expected return of an investment in Custodian Property Income REIT using the absolute valuation approach? ====		==== What's the expected return of an investment in Custodian Property Income REIT using the absolute valuation approach? ====
	Accordingly, we estimate that the expected return of an investment in Custodian Property Income REIT Plc over the next five-years is 53%, which equates to an annual return of 8.9%. In other words, an £100,000 investment in the company is expected to return ~~£153~~,000 in five-years from now. The assumptions used to estimate the return figure can be found in the table below.		Accordingly, we estimate that the expected return of an investment in Custodian Property Income REIT Plc over the next five-years is 62%, which equates to an annual return of 10.2%. In other words, an £100,000 investment in the company is expected to return £162,000 in five-years from now. The assumptions used to estimate the return figure can be found in the table below.

	Assuming that a suitable return level in the five years is 50% and Custodian Property Income REIT Plc achieves its expected return level (of 53%), then an investment in the company is considered to be a 'suitable' one.		Assuming that a suitable return level in the five years is 60% and Custodian Property Income REIT Plc achieves its expected return level (of 62%), then an investment in the company is considered to be a 'suitable' one.

	==== What are the assumptions used to estimate the return figure? ====		==== What are the assumptions used to estimate the return figure? ====
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	\|-		\|-
	\|What is the required return on equity?		\|What is the required return on equity?
	\|6.04%		\|5.73%
	\|For estimating the required return on equity, we used the Capital Asset Pricing Model (CAPM), which provides an economically grounded and relatively objective procedure for required return estimation, and, therefore, it has been widely used in valuation. The calculation of the required return on equity (and the reasons behind the calculation) can be found in the table below.		\|For estimating the required return on equity, we used the Capital Asset Pricing Model (CAPM), which provides an economically grounded and relatively objective procedure for required return estimation, and, therefore, it has been widely used in valuation. The calculation of the required return on equity (and the reasons behind the calculation) can be found in the table below.
	\|-		\|-
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	\|-		\|-
	\|Equity risk premium (%)		\|Equity risk premium (%)
	\|6.00		\|5.26
	\|Here, the equity risk premium is in relation to the global region, and is calculated as at 1st January 2022 (<nowiki>https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ctryprem.html</nowiki>).		\|Here, the equity risk premium is in relation to the global region, and is calculated as at 1st January 2022 (<nowiki>https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ctryprem.html</nowiki>).
	\|-		\|-
	\|Cost of equity (%)		\|Cost of equity (%)
	\|6.04%		\|5.73%
	\|Cost of equity = Risk-free rate + Beta x Equity risk premium.		\|Cost of equity = Risk-free rate + Beta x Equity risk premium.
	\|}		\|}
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	The three main inputs that result in the greatest change in the expected return of the Custodian Property Income REIT Plc investment are, in order of importance (from highest to lowest):		The three main inputs that result in the greatest change in the expected return of the Custodian Property Income REIT Plc investment are, in order of importance (from highest to lowest):

	# The discount rate (the default multiple is 6.04%);		# The discount rate (the default multiple is 5.73%);
	#The 12-month ahead dividend per share forecast (the default forecast is 5.56 pence per share); and		#The 12-month ahead dividend per share forecast (the default forecast is 5.56 pence per share); and
	# The dividend growth rate (the default multiple is 1.57%).		# The dividend growth rate (the default multiple is 1.57%).
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	\|-		\|-
	\|Discount rate		\|Discount rate
	\|9%		\|15%
	\|53%		\|62%
	\|~~158~~%		\|177%
	\|-		\|-
	\|Dividend per share		\|Dividend per share
	\|7%		\|14%
	\|53%		\|62%
	\|99%		\|111%
	\|-		\|-
	\|Growth rate		\|Growth rate
	\|38%		\|46%
	\|53%		\|62%
	\|72%		\|83%
	\|}		\|}

95.149.161.208 at 11:11, 17 December 2022

2022-12-17T11:11:40Z

← Older revision		Revision as of 12:11, 17 December 2022
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	Fixed rate agreed debt facilities increased from 61% to 74%, significantly mitigating interest rate risk and maintaining a beneficial margin between the aggregate cost of debt of 3.5% and income returns from the property portfolio		Fixed rate agreed debt facilities increased from 61% to 74%, significantly mitigating interest rate risk and maintaining a beneficial margin between the aggregate cost of debt of 3.5% and income returns from the property portfolio

	Custodian Property Income REIT’s loan-to-value at 30th September 2022 of 25.5% now stands at 24.0% following post period end sales. Of the Company’s £178m of drawn debt facilities 79% is at fixed rates of interest and the balance is drawn on a variable rate revolving credit facility. The weighted average term of drawn debt is 6.3 years and the average cost of debt is 3.5%. Thanks to a strong balance sheet with significant covenant headroom and no debt facility maturing until September 2024 the Company is under no pressure to sell and the relatively low cost of debt should remain accretive to earnings through this phase of market turbulence.		Custodian Property Income REIT’s loan-to-value at 30th September 2022 of 25.5% now stands at 24.0% following post period end sales. Of the Company’s £178m of drawn debt facilities 79% is at fixed rates of interest and the balance is drawn on a variable rate revolving credit facility. The weighted average term of drawn debt is 6.3 years and the average cost of debt is 3.5%. Thanks to a strong balance sheet with significant covenant headroom and no debt facility maturing until September 2024 the Company is under no pressure to sell and the relatively low cost of debt should remain accretive to earnings through this phase of market turbulence.

			The Company may use gearing provided that the maximum LTV shall not exceed 35%, with a medium-term net gearing target of 25% LTV.

	== Name change ==		== Name change ==
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	\|Which valuation model do you want to use?		\|Which valuation model do you want to use?
	\|Discounted cash flow		\|Discounted cash flow
	\|Research suggests that in terms of estimating the expected return of an investment over a period of 12-months or more, the approach that is more accurate is the absolute valuation approach, so that's the approach that we suggest using to determine the estimated value of the company.		\|Research suggests that in terms of estimating the expected return of an investment over a period of 12-months or more, the approach that is more/most accurate is the absolute valuation approach<ref>Demirakos et al., 2010; Gleason et al., 2013.</ref>, so that's the approach that we suggest using to determine the estimated value of the company.
	\|-		\|-
	\|Which type of discounted cash flow model do you want to use?		\|Which type of discounted cash flow model do you want to use?
	\|Dividend discount model		\|Dividend discount model
	\|~~The~~ dividend discount model (DDM) is one of the most common discounted cash flow models.		\|As a UK real estate investment trust (REIT), the company is legally required to distribute 90% of its income to shareholders (within 12-months of the end of the accounting period).<ref>https://www.pwc.co.uk/services/tax/insights/uk-reits-attractive-vehicle-uk-property-investment/reit-conditions.html#distribution</ref><ref>However, neither exempt gains, nor profits from the residual business income have to be distributed.</ref> Accordingly, we suggest using the dividend discount model (DDM), which is one of the most common discounted cash flow models.
	\|-		\|-
	\|How many distinct stage of growth do you want to use?		\|How many distinct stage of growth do you want to use?
	\|One stage		\|One stage
	\|For simplicity, we have used the one stage pattern here.		\|For simplicity, we have used the one stage pattern here.
			\|-
			\|What is the expected lifespan of the business?
			\|Perpetual
			\|Again, for simplicity, we have assumed that the business continues forever.
	\|-		\|-
	\|What is the expected constant growth rate in dividends?		\|What is the expected constant growth rate in dividends?
	\|1.57%		\|1.57%
	\|We note that the gross domestic product (GDP) growth rate in the last 20 years (2001 to 2022) is around 3% per year for the global economy, and around 2.25% for the United Kingdom. Since the company's inception (i.e. eight years), the median dividend of the company is 1.57%.		\|We note that the gross domestic product (GDP) growth rate in the last 20 years (2001 to 2022) is around 3% per year for the global economy, and around 2.25% for the United Kingdom. Since the company's inception (i.e. eight years ago), the median dividend of the company is 1.57%.
	\|-		\|-
	\|Which financial forecasts to use?		\|Which financial forecasts to use?
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	=== Dividends ===		=== Dividends ===
	Since the company's inception (i.e. eight years ago), the median dividend of the company is 1.57%.		Since the company's inception (i.e. eight years ago), the median dividend of the company is 1.57%, and the mean is 0.78%. We note that if the dividend grows in the current financial year (i.e. the year ending 31st March 2023) in-line with our forecast (i.e. 4.76%), then the median will increase to 1.59% and the mean to 1.28%.
	{\| class="wikitable"		{\| class="wikitable"
	\|+Declared Custodian Property Income REIT plc dividends		\|+Declared Custodian Property Income REIT plc dividends