Company Interview / DXC hitting the gas on growth

Key points:

DXC posts strong FY25 results and targets further distribution growthFocus on highway site developments with major tenants like Viva Energy and McDonald’sCapital redeployed from smaller regional assets to high-performing metro and highway locationsEV transition viewed as slow, with current demand supporting fuel and convenience offerings

Dexus Convenience Retail REIT (ASX:DXC) is delivering on its FY25 guidance, reporting funds from operations and distributions of 20.7 cents per security, with income growth of 2.9%. Fund Manager Jason Weate says the standout for markets is the resumption of earnings growth after a tough period for REITs impacted by rising interest rates and cost pressures. Weate attributes the 99.9% occupancy and a weighted average lease term of 7.9 years as key strengths, coupled with a focus on major national and international tenants. The REIT is targeting FY26 distributions of 20.9 cents per security, implying a yield of 7.1%, and has outlined a growth in net tangible assets, with 2.2% NTA growth posted for FY25.

Undersupply is flagged as a significant driver, with constrained supply in the fuel and convenience sector mirroring trends across real estate asset classes. Weate points to strong highway site performance, exemplified by the ongoing Glasshouse Mountains development on the Bruce Highway, which will house tenants like Viva Energy, Hungry Jack’s, KFC, Guzman y Gomez, and McDonald’s. Capital is being redeployed from divesting smaller regional assets into these high-traffic locations, expected to deliver a 20% development IRR.

The transition to electric vehicles is expected to be gradual. With over 1 million fuel-reliant cars sold in Australia last year, Weate highlights ongoing demand for fuel and the premium margins in convenience retail. Balance sheet gearing sits at 29%, providing capacity for additional development and pipeline growth.