A look at the Australian property space - GMG, ARF, RFF

A look at the Australian property space - GMG, ARF, RFF

Property sector of Australia is one of the most prominent sectors, which generates employment, leads to increase in GDP, results infrastructure development etc. It looks like that during FY20, the Australian property market would experience a rebound, which most probably would be led by Sydney and Melbourne. In the below article, we will look at a few of the ASX-listed property related companies with their latest earnings updates:

Goodman Group

Goodman Group (ASX: GMG) is an integrated property group, which is involved in property development and funds management business.

Double-digit growth in operating profit

The company recently released its results for first half of financial year 2020, where the key management personnel of the company stated that 1H FY20 witnessed achievement of solid performance from all reportable segments.

  • The company experienced a rise of at least 10% over 1H FY19 in earnings from investment, development and management, while assets under management stood at $49.2 billion, reflecting a growth 15% year over year.
  • During the period, the company reported operating profit amounting to $530.4 million, reflecting doble digit growth of 14.1% as compared to 1H FY19. GMG also experienced an increase of 12.9% in operating earnings per share, which stood at 28.8 cents.
  • The strong financial performance is the outcome of focus on specific market segments with growing e-commerce, increasing consumer expectations and the ever-increasing need for efficient supply chains.
  • The company continues to attain scale in its target markets along with the increasing work in progress, which reached $4.3 billion at the half-year and it is anticipated to surpass $5 billion.
  • For the half-year, the company declared distribution of 15.0 cents per stapled security, which is in line with capital management strategy of the group in order to attain a payout ratio in the low 50% range.
  • The deliberate deployment of its assets in locations with focus on urban logistics is resulting in properties with high quality for its customers as well as robust returns for the Group and its partners.
  • On the future perspective, the company is expecting EPS of 57.3 cents per security for FY20, indicating growth of 11% on FY19. It affirmed its guidance for full year distribution of 30 cents per share.

Also Read: A guide to diversification in REITs.

The stock of GMG closed the day’s trading at $16.300 per share on 13th February 2020, reflecting a rise of 5.844% from its previous closing price. The company has a market capitalization of $28.16 billion as on 13th February 2020. The total outstanding shares of the company stood at 1.83 billion, and its 52-week low and high are $11.910 and $16.600, respectively. The stock has given a total return of 8.15% and 2.05% in the time period of three months and six months, respectively.

Arena REIT

Arena REIT (ASX: ARF) manages ,owns and develops infrastructure properties based on social themes throughout Australia. The company officially got listed on Australian Securities Exchange in 2013.

How has the company performed during 1H FY20?

ARF, through a release dated 13th February 2020 notified the market with its operational and financial performance for the 1H FY20 and outlined the following:

  • For the half-year ended 31 December 2019, the company reported net operating profit amounting to $21.4 million, which showed the growth of 17% as compared to pcp. Income growth from annual rent reviews, acquisitions and development projects, which completed in FY19 and 1HY FY20 have been a major contributor the growth in net operating profit.
  • Moreover, the statutory net profit for the half-year stood at $42.2 million, demonstrating the growth of 24% as compared to pcp. This has been primarily driven because of higher operating profit, uplift from property valuation, gains realized on the sale of divested properties as well as the positive revaluation of interest rate hedges.
  • During 1H FY20, the total assets of the company experienced a surge of 8% and reached at the valuation of $890.4 million. This has been resulted by acquisitions, development capital expenditure as well as positive portfolio revaluation.
  • It was mentioned that the annual rent reviews have been completed more than 52% of portfolio income in 1H FY20, with an average like-for-like rent enhancement of 3.1% over previous rent being achieved.
  • On the outlook front, for FY20, the company has affirmed distribution per security guidance of 14.3 cents per security, reflecting a rise of 6% as compared to FY19.
  • As of 31st December 2019, the company’s gearing stood at 23.2%, which witnessed a rise from 22.8% at 30 June 2019. The company possesses undrawn debt capacity amounting to $123 million in order to finance the forecast $44 million balance of development capital expenditure as well as new investments.

The stock of ARF closed the day’s trading at $3.180 per share on 13th February 2020, reflecting a rise of 0.315% from its previous closing price. The company has a market capitalisation of $954.05 million as on 13th February 2020. The total outstanding shares of the company stood at 300.96 million, and its 52-week low and high are $2.510 and $3.210, respectively. The stock has given a total return of 9.69% and 11.62% in the time period of three months and six months, respectively.

Rural Funds Group

Rural Funds Group (ASX: RFF) is a rural property investment company, which officially got listed on Australian Securities Exchange in 2014. Responsible entity for the Rural Funds Group, namely, Rural Funds Management Limited through a release advised the market that the Supreme Court of New South Wales has passed judgement in favour of Rural Funds Management Limited. The judgement has been passed with respect to legal proceedings with Bonitas Research LLC and its principal, Matthew Wiechert. The Supreme Court found that statements made by Bonitas and Matthew Wiechert in Australia were false in material data and were materially misleading.

On the financial front, the company’s property revenue of the company witnessed a rise of 30% in FY 2019 because of JBS transactions, acquisitions, development capital expenditure, as well as lease indexation. The company witnessed a growth of 4.7% in Adjusted Funds from operations (AFFO) per unit in FY19, which stood in line the expectations of the company. The company witnessed a rise in adjusted total assets of $222.2 million in FY19 largely because of acquisitions, capex and revaluations of almond orchards, vineyards and water entitlement.

When it comes to outlook for FY20, the company anticipates AFFO per unit of 14.0 cents for FY20, reflecting growth of 5.26% as compared to FY19.

The stock of RRF closed the day’s trading at $2.050 per share on 13th February 2020, reflecting a rise of 3.275% from its previous closing price. The company has a market capitalization of $668.59 million as on 13th February 2020. The total outstanding shares of the company stood at 336.82 million, and its 52-week low and high are $1.360 and $2.420, respectively. The stock has given a total return of 13.43% and 7.88% in the time period of three months and six months, respectively.


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