BWP Trust shares continue surge as earnings trigger Citi upgrade
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The news: BWP Trust shares extended gains on the ASX after its first-half result impressed analysts.
The numbers: BWP shares were up 3.5% to $3.57 by 11:20am AEDT, having closed 4.9% higher on Wednesday.
Citi upgraded its rating on BWP from 'sell' to 'neutral' and raised its target price from $3.40 to $3.45.
The context: Citi said its upgrade was driven by a 21% downturn in BWP's share price since 2020, which it now views as "fairly priced". Citi's analysts said the company "remains a stable growing business supported by a strong underlying tenant covenant in Bunnings warehouse".
Elsewhere, Morgan Stanley kept its 'equal-weight' rating and $3.90 target price on BWP. Analysts said its first-half result was "good from various perspectives", including marking "the first time in years that the distribution was covered by earnings" and not reliant on reserves.
Morgan Stanley's analysts also noted that BWP only has 14 lease expiries to be extended by FY26, down from 19 leases as at June last year. However, they warned the "key concern" is that around 40% of the company's leases are due to expire across FY26 and FY27.
Morningstar analyst Adrian Atkins called BWP's result "solid and broadly in line with our expectations". He flagged "medium-term headwinds" from Bunnings vacating older stores and the rising costs of debt, but noted "otherwise solid rental growth" across the company's portfolio.
Morningstar kept its fair value estimate on BWP at $3.80 per share. Atkins said the stock is "still attractive despite the 5% share price rally after releasing results".
The sources: Citi research, Morningstar research, Morgan Stanley research
