【is the nslc program worth it】What You Need To Know Before Investing In Arena REIT (ASX:ARF)
Arena REIT is is the nslc program worth ita AU$670m small-cap, real estate investment trust (REIT) based in Melbourne, Australia. REITs are basically a portfolio of income-producing real estate investments, which are owned and operated by management of that trust company. They have to meet certain requirements in order to become a REIT, meaning they should be analyzed a different way. In this commentary, I’ll take you through some of the things I look at when assessing ARF.
View our latest analysis for Arena REIT
A common financial term REIT investors should know is Funds from Operations, or FFO for short, which is a REIT’s main source of income from its portfolio of property, such as rent. FFO is a cleaner and more representative figure of how much ARF actually makes from its day-to-day operations, compared to net income, which can be affected by one-off activities or non-cash items such as depreciation. For ARF, its FFO of AU$34m makes up 77% of its gross profit, which means the majority of its earnings are high-quality and recurring.
ASX:ARF Historical Debt January 2nd 19
In order to understand whether ARF has a healthy balance sheet, we have to look at a metric called FFO-to-total debt. This tells us how long it will take ARF to pay off its debt using its income from its main business activities, and gives us an insight into ARF’s ability to service its borrowings. With a ratio of 19%, the credit rating agency Standard & Poor would consider this as significantly high risk. This would take ARF 5.3 years to pay off using operating income alone. Given that long-term debt is a multi-year commitment this is not unusual, however, the longer it takes for a company to pay back debt, the higher the risk associated with that company.
Next, interest coverage ratio shows how many times ARF’s earnings can cover its annual interest payments. Usually the ratio is calculated using EBIT, but for REITs, it’s better to use FFO divided by net interest. This is similar to the above concept, but looks at the nearer-term obligations. With an interest coverage ratio of 6.22x, it’s safe to say ARF is generating an appropriate amount of cash from its borrowings.
In terms of valuing ARF, FFO can also be used as a form of relative valuation. Instead of the P/E ratio, P/FFO is used instead, which is very common for REIT stocks. In ARF’s case its P/FFO is 19.35x, compared to the long-term industry average of 16.5x, meaning that it is slightly overvalued.
Next Steps:
Arena REIT can bring diversification into your portfolio due to its unique REIT characteristics. Before you make a decision on the stock today, keep in mind I’ve only covered one metric in this article, the FFO, which is by no means comprehensive. I’d strongly recommend continuing your research on the following areas I believe are key fundamentals for ARF:
Story continues
Future Outlook
: What are well-informed industry analysts predicting for ARF’s future growth? Take a look at our
free research report of analyst consensus
for ARF’s outlook.
Valuation
: What is ARF worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The
intrinsic value infographic in our free research report
helps visualize whether ARF is currently mispriced by the market.
Other High-Performing Stocks
: Are there other stocks that provide better prospects with proven track records? Explore our
free list of these great stocks here
.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at
.
View comments
-
Don't Let China Control Your Networks, U.S. Envoy Tells EuropeIntegrated Passive Devices Market revenue to cross USD 2 Billion by 2026: Global Market Insights, Inc.Crypto Influencers Are Following the Beauty Playbook – Even if They Don’t Know ItTechnical Enzymes Market 2028 - Global Insights on Trends, Regulatory Landscape, Value Chain Analysis, Key Stakeholders, Growth Drivers and Future Outlook: Adroit Market ResearchOrganic elderberries recalled over possible salmonella contaminationRead This Before Selling Altura Mining Limited (ASX:AJM) SharesGreat Ajax Corp. to Host Earnings CallXtierra Announces $1 Million FinancingTrintech Extends Reporting Capabilities in Its Adra Suite with the Launch of Adra AnalyticsWhy the Earnings Surprise Streak Could Continue for Dick's (DKS)
下一篇:UK to extend furlough scheme beyond Dec. as BOE pumps in 150bln pounds - The Sun
- ·Top Ranked Growth Stocks to Buy for June 4th
- ·WhatsApp no longer supported on millions of phones
- ·Accel Entertainment Inc - Ordinary Shares - Class A1 to Host Earnings Call
- ·Lockheed Martin (LMT) Wins $1B Deal for Super Hercules Fleet
- ·AUD/USD Forecast: Bottomed At 0.6038, At Risk Of Losing The 0.6000 Level
- ·5 Value Stocks In The Energy Sector
- ·The Global Cloud Encryption Software Market is expected to grow by $ 2.82 bn during 2020-2024 progressing at a CAGR of 38% during the forecast period
- ·Trust Stamp Prepares to Pursue Direct Public Listing on Euronext Growth Market
- ·Were Hedge Funds Right About Automatic Data Processing (ADP)?
- ·Comcast Stock Rises 3%
- ·Global watchdog warns over financial staff curbs in pandemic
- ·Baker Hughes Snaps Up Compact Carbon Capture For Energy Transition Path
- ·3 Reasons Growth Investors Will Love Charles River (CRL)
- ·Euro Sun Mining Announces the Filing of a Business Acquisition Report in Connection with its Acquisition of Vilhelmina Minerals Inc.
- ·BRIEF-CITIC Ltd Updates On The Proposed Restructuring Of Daye Special Steel
- ·ICEsoft To Host Investor Call To Present Q3 Financial Results And To Provide A General Business Update
- ·Do Hedge Funds Love Brooge Energy Limited (BROG)?
- ·People are getting this unexpected stimulus check. Should you keep it?
- ·BRIEF-My Heart Bodibra Group Ltd Sees Increase In Loss For Nine Months
- ·Clarivate Analytics Plc (CCC) Q1 Earnings and Revenues Miss Estimates
- ·Tap These 5 Bargain Stocks With Enticing EV/EBITDA Ratios
- ·Despite Its High P/E Ratio, Is Ovzon AB (publ) (STO:OVZON) Still Undervalued?
- ·Freedom Trail and Black Heritage Trail Bring History Into Homes Near and Far
- ·SHAREHOLDER ALERT: CLAIMSFILER REMINDS FSCT, WFC INVESTORS of Lead Plaintiff Deadline in Class Action Lawsuits
- ·Trump slams Fed's coronavirus response as 'slow,' renews calls for lower interest rates
- ·Robin.io Expands Leadership Team and Advisory Board for 5G Market
- ·Do Hedge Funds Love Brooge Energy Limited (BROG)?
- ·EXPLAINER-Why automakers are on a drive to sell electric cars in Europe
- ·Silver Price Daily Forecast – Silver Attempts To Break Through The Key Resistance Level
- ·Earnings Outlook for Manitowoc Co
- ·State-backed hackers targeting coronavirus workers, US and UK warn
- ·CORRECTED-Fed's Evans says U.S. should support workers who lose pay if coronavirus worsens
- ·BRIEF-CITIC Ltd Updates On The Proposed Restructuring Of Daye Special Steel
- ·Square Inc (SQ) President, CEO & Chairman Jack Dorsey Sold $20.9 million of Shares
- ·Is Wanda Sports Group (WSG) A Good Stock To Buy Now?
- ·Antibodies, Protein-based Vaccines, Anti-virals, and Cell-based Therapies to Lead the Development of COVID-19 Treatment Pipeline- Exclusive Report by Meticulous Research®