Multiplex SITES

ASX Code: MXUPA
Security price: $89.01
Industry: Real Estate
Forecast distribution for 2014: $6 per security
I have recently highlighted a number of real estate investment trusts, such as Industria REIT, offering good income and upside from growth.
This week, I want to revisit another property security, Multiplex SITES, in the wake of its performance last year and annual report.
We continue to believe it ­offers strong income and potential upside from redemption of the securities at face value.
The SITES, which haven’t missed a distribution since their issue, provide a yield of more than 6 per cent. Also, a strong business underlies the securities. That makes them a good option for­ ­income investors.
Multiplex SITES were issued in 2005 by Multiplex Group.
Canadian private equity giant Brookfield Asset Management took over Multiplex in 2007.
Multiplex SITES Trust’s sole asset is investment in units in the Multiplex Hybrid Investment Trust. Multiplex SITES holders are effectively lenders to Brookfield’s Australian sub­sidiary and receive quarterly ­dividends.
Multiplex SITES Trust’s fin­ancial results for 2014 showed payments for the year from MHIT were solid and stable, falling slightly from $30.33 million to $29.43m. Net assets were also stable at $450m.
The SITES distribution rate is set at the start of each quarter and represents the three-month bank bill rate determined on the first business day of the relevant distribution period, plus a margin of 3.9 per cent. Distributions are discretionary, although they have been paid quarterly since the Australian Securities Exchange listing in 2005.
In 2014, Multiplex SITES’s four distributions were $1.60, $1.63, $1.65 and $1.66, taking total payout for the year to $6.54.
In the first quarter of this year, the distribution rate was 6.64 per cent or $1.63 a security. We ­expect the total payout for this year to be about $6 a security.
The distributions are paid on a face value of $100 a security. But Multiplex SITES are floating notes: they fluctuate, and are now trading at $89.01. So with a payout of $6, the yield is actually 6.7 per cent, unfranked.
In terms of security, Brookfield Australia Investments and Brookfield Australia Property trust guarantee the face value of the SITES on redemption and any unpaid distributions in the year preceding redemption on an unsecured and subordinated basis.