Residential property developers and stocks on ASX – PPC ADI AQR ARF

  • Jul 10, 2020 AEST
  • Team Kalkine
Residential property developers and stocks on ASX – PPC ADI AQR ARF

Summary

  • The Prime Minister of Australia has announced grant of A$25,000 to build a new home and also for renovation to eligible citizens, a move to boost the residential and construction market
  • Peet Limited is well-positioned to capitalise on the recent improvement in market conditions and Government stimulus, backed by strong cash position and increased number of orders in hand.
  • A strong balance sheet of APN Industria REIT is likely to provide headroom for future growth.
  • Acquisition of Brisbane Airport Link Service Centre reflects an outstanding opportunity to own a prominent service centre to AQR

Residential market plays a significant contribution towards the development of the economy. However, in the past few months, the housing market has collapsed due to COVID-19. The latest residential property survey done by National Australia Bank stated that housing market sentiment went down to negative 33 points during the second quarter, a drop of 71 points from 38 points reported in first quarter.

To boost the residential and construction market, Prime Minister, Scott Morrison has recently announced the new ‘Home Builder’ programme that would provide a grant of A$25,000 to build a new home and also for renovation to eligible citizens. The ‘Home Builder’ programme is expected to create opportunities for almost one million workers. This grant in residential construction is likely to fill the gap in construction activity expected in Q2 FY20 due to the coronavirus pandemic. In the below article, we will look at some of the residential developers’ companies listed on ASX:

Peet Limited

Peet Limited (ASX: PPC) engages in the acquisition, developing, and marketing of residential land based on a capital-efficient funds management model. In a recent update, the company highlited that it witnessed a continuation of the early signs of market improvement from the impact of COVID-19 on the economy. The company added that a significant improvement in customer enquiry levels was experienced since the introduction of Federal and State Government stimulus measure. 

As of 30th June 2020, the contracts on hand of the company stood at 1,786, reflecting a rise of 42% as of 30th June 2019. Moreover, cash and debt facility headroom surpassed A$130 million.

Guidance: For FY20, the company expects restructuring and divestment-related provisions of around A$45 million. PPC anticipates operating profit after tax in the ambit of A$14 million-A$16 million. The company is well placed to capitalise on recent improvement in market conditions as well as Government stimulus.

As on 10 July 2020 at 1:33 PM (AEST), the stock of PPC stood at A$0.900 per share.

APN Industria REIT

APN Industria REIT (ASX: ADI) makes investment in income producing business park properties and industrial warehouses within Australia. As per the market update provided on 20th May 2020, the portfolio of the company comprises 17 industrial properties, and 15 low-rise business park properties leased to cost-conscious occupiers. The weighted average cap rates are 6.2% and 6.7% respectively.

The company stated that around 10% – 15% of tenants are eligible for relief under the Code of Conduct by the Australian Government. The company has continued to work with impacted tenants to provide an appropriate level of rental relief. Moreover, the rent collection has been pleasing and APN collected round 95% of billings for April 2020.

Do Read: How these property stocks performed in their half-year?

The company possesses strong balance sheet with low gearing of 28.8% as of 30th December 2019, which was below the target range of 30% - 40%. 

In another update, the company reported distribution for FY20 of 4.15 cents per security. This brought the total FY20 distribution to 17.275 cents, which was an outcome ahead of the expectations when guidance was suspended in April 2020.

As on 10 July 2020 at 1:33 PM (AEST), the stock of ADI stood at A$2.390 per share.

APN Convenience Retail REIT

APN Convenience Retail REIT (ASX: AQR) own and manage a quality portfolio of convenience retail properties which offer secure income streams and have the potential for capital growth. The Company recently announced to agree to acquire Brisbane Airport Link Service Centre, QLD for the consideration of A$10.5 million, indicating a purchase yield of 6.15%. 

The company added that the newly built service centre anchored by a 15 year lease to Ampol, which reflects 78% of the centre’s income, with the remainder of the income derived from Zarraffa’s Coffee as well as a local restaurant operator. 

On 1st July 2020, the company advised the market that Chevron Australia Downstream Pty Ltd, a wholly-owned subsidiary of Chevron Corporation has finished the acquisition of all shares and equity interests of Puma Energy (Australia) Holdings Pty Ltd. Puma Energy is the tenant at 46 sites in the APN Convenience Retail REIT portfolio, reflecting 58% of AQR’s rental income.

As on 10 July 2020 at 1:33 PM (AEST), the stock of AQR stood at A$3.580 per share.

Arena REIT

Arena REIT (ASX: ARF) owns and operates a portfolio of real estate assets. Recently, the company announced that Australian Unity Funds Management Limited had made a change to their substantial holdings in the company on 6th July 2020 and the current voting power stands at 7.58% as compared to the previous voting power of 8.72%. 

On 30 June 2020, The Company announced that it has finished its share purchase plan and raised A$24.9 million. Previously, the company has also wrapped up institutional placement from which the company raised A$60 million. Considering the strong level of support received from existing security holders and potential new investors, the company decided to increase the size of the Institutional Placement from A$50 million to A$60 million.

Half yearly results ending 30th June 2020, the company declared distribution of 6.85 cents per stapled security, which is in line with the upper range of FY20 distribution guidance of 13.9 to 14.0 cents per security.

As on 10 July 2020 at 1:33 PM (AEST), the stock of ARF stood at A$2.200 per share.

 


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