Blackwall Property Trust (ASX:BWR) is a AUDA$92.62M real estate investment trust (REIT), which is a collective vehicle for investing in real estate that began in the US and has since been adopted worldwide as an investment asset. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the Australian stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether Blackwall Property Trust is a laggard or leader relative to its real estate sector peers. See our latest analysis for Blackwall Property Trust
What’s the catalyst for Blackwall Property Trust’s sector growth?
Issues around rate hikes and yield changes have made investors sceptical of REITs. The capacity for these investment vehicles to absorb a rate hike should be considered, hence, factors such as lease durations and pricing power in the market would require a deeper dive. In the past year, the industry delivered negative growth of -4.47%, underperforming the Australian market growth of 6.88%. Blackwall Property Trust leads the pack with its impressive earnings growth of 14.09% over the past year. This proven growth may make Blackwall Property Trust a more expensive stock relative to its peers.
Is Blackwall Property Trust and the sector relatively cheap?
The REIT industry is trading at a PE ratio of 8x, lower than the rest of the Australian stock market PE of 18x. This means the industry, on average, is relatively undervalued compared to the wider market – a potential mispricing opportunity here! Furthermore, the industry returned a higher 15.57% compared to the market’s 11.86%, making it a potentially attractive sector. On the stock-level, Blackwall Property Trust is trading at a PE ratio of 5x, which is relatively in-line with the average REIT stock. In terms of returns, Blackwall Property Trust generated 20.48% in the past year, which is 4.91% over the REIT sector.
What this means for you:
Are you a shareholder? Blackwall Property Trust recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders, and the stock is currently trading in-line with its peers. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto Blackwall Property Trust as part of your portfolio. However, if you’re relatively concentrated in REIT, you may want to value Blackwall Property Trust based on its cash flows to determine if it is overpriced based on its current growth outlook.