Property Development: Lens on 3 NZX-Listed Property Stocks

  • Jun 17, 2020 NZST
  • Team Kalkine
Property Development: Lens on 3 NZX-Listed Property Stocks

Summary

  • New Zealand had been declared COVID-19 free country and had lifted all restrictions to recover the economic loss. However, there are two active cases in the country at present.
  • However, eradication of virus will not end the financial loss, and some experts are predicting that this year property prices will drop in New Zealand.
  • Argosy Property reported an increase of 3.8% in net distributable income in FY20 and witnessed robust portfolio leasing outcomes despite a challenging situation.
  • Office portfolio of Kiwi Property remains highly resilient with NZ$15 million valuation gain.

COVID-19 pandemic has left streets, shopping malls and offices empty, because everyone across the globe is arrested at home, which has become a way of life over the last few months since the fight with this crisis started. However, New Zealand was declared COVID-19 free, with the country is dropping all the restrictions. However, there are two active cases at present. Despite the win over the virus, the economic pain for the nation is expected to linger for a while.

Some economists are predicting that house prices will drop this year in New Zealand. However, there are some positive factors in this sector, including reduced interest rates, a government spend-up and the general resilience of the financial system.

In this article, we will discuss the recent activities of three NZX-listed property stocks - ARG, KPG, IPL

Argosy Property Limited (NZX:ARG)

One of New Zealand’s leading listed property companies, Argosy Property Limited owns a diversified portfolio of industrial, office and retail properties predominately in Auckland and Wellington. Moreover, the company has modest tenant-driven exposure to other parts of New Zealand.

On 20 May 2020, the company disclosed its FY20 annual results (year ended 31 March 2020) and the highlights are-

  • The net distributable income in FY20 increased by 3.8% and net distributable income per share rose by 3.7%.
  • In FY20, Argosy Property Limited witnessed robust portfolio leasing outcomes, primarily in Wellington, with 7 Waterloo Quay (WQ) currently 82% leased to the Crown.
  • Argosy Property disclosed a rise in net tangible assets (NTA) per share to NZ$1.30 from NZ$1.22 as on 31 March 2019.
  • For the fiscal year 2021, Argosy Property disclosed per share dividend guidance of 6.35 cents, indicating continued sound delivery of the strategy.

 

Green Developments Remain the Key Focus

The company stated that focus remains on transforming value add assets into green developments where possible.

 

Source: Company's presentation

 

Stock Information

On 17 June 2020, ARG stock closed the day’s trade at NZ$1.175, up by 1.29% with a market cap of nearly NZ$971.95 million. The P/E ratio of ARG was noted at 8.050x with a gross dividend yield of 6.187%.

Kiwi Property Group Limited (NZX:KPG)

Kiwi Property Group Limited happens to be a leading property company which is listed on New Zealand Stock Exchange. It is also a member of NZX15 Index. Its objective revolves around providing investors with dependable investments in NZ property market by aiming improved risk-adjusted returns via effective management and ownership of high-quality, diversified portfolio.

On 25 May 2020, the company reported FY 2020 financial results (year ended 31 March 2020), including COVID-19 update as well as outlook.

Key Highlights

  • Net rental income witnessed an increase of 3.4% to NZ$186.8 million. The income contributed to the operating PBT of NZ$129.7 million, an increase of 4.2% on pcp.
  • Funds from operations rose 6.3% to NZ$113.6 million, boosted by income growth throughout diversified property portfolio.

 

COVID-19 Update

  • Kiwi Property mentioned that it is in discussions with the tenants to share a reasonable portion of the financial effect due to the coronavirus pandemic.
  • Currently, the core focus of the company is on supporting SMEs along with retail tenants unable to trade during the pandemic induced lockdown.
  • Measures include a combination of rental abatements and deferrals. Abatements apply to the first quarter of the FY 2021 and are anticipated to impact FFO by NZ$20 million, equivalent to nearly 8% of gross rental income of FY20.

 

Moreover, the company also disclosed COVID-19 impact on its business-

Property valuations- Fair value of property portfolio declined by 8.5% or NZ$290 million to NZ$3.1 billion as on 31 March 2020. However, office portfolio remains highly resilient, with NZ$15 million valuation gain.

FY21 Outlook

  • Full impact of the coronavirus pandemic on New Zealand or Kiwi Property is not yet known. However, navigating the pandemic will be on priority in FY 2021.
  • The company will focus on three key themes- resilient business, resilient strategy, and resilient assets.
  • With its diversified property portfolio, commitment to cost discipline and banking headroom, Kiwi Property will navigate the financial impacts of COVID-19 and strive to capitalise on the opportunities that follow.

 

Stock Information

On 17 June 2020, KPG stock closed the day’s trade at NZ$1.040, up by 0.97% with a market cap of nearly NZ$1.63 billion. The gross dividend yield of stock was reported to be 4.189%.

Investore Property Limited (NZX:IPL)

NZX-listed commercial property ownership company, Investore Property Limited was founded to invest in quality large format retail property assets.

On 3 June 2020, Investore disclosed its annual results along with COVID-19 update and outlook for the upcoming year.

Financial Highlights (year ended 31 March 2020)

  • For FY 2020, Investore reported net rental income of NZ$48.1 million, up by NZ$0.7 million on FY19.
  • The company reported a profit after income tax of NZ$28.6 million, down by NZ$9.9 million on pcp.

 

Source: Company's presentation

 

COVID-19 Update

Investore’s portfolio comprises a high proportion of ‘essential businesses’ that continued to trade during the government lockdown and a limited number of leases permitting tenants to suspend or abate rental payments.

  • The company notified it has worked with its tenants to support them through the impact of COVID-19.
  • Investore anticipates the impact of the coronavirus pandemic to cause reduced gross rent receivable for FY 2021 of between NZ$1-NZ$2 million. Moreover, the company projects to offer rent deferrals to specific tenants which will be structured to be repaid by 31 March 2021.
  • Balanced against the reduced gross rent receivable for FY 2021, Investore will benefit from the reintroduced building depreciation deduction claims for property owners with commercial properties at a level of 2% of diminishing value a year, starting in April 2020. It is estimated to provide a financial benefit to Investore of nearly NZ$ 2.2 million for the FY 2021.

 

Outlook

  • Targeted growth to enhance the portfolio and maximise returns to investors over the medium to long term.
  • Monitoring the impact of COVID-19, seeking to minimise the impact on Investore’s business, while also assisting tenants to maintain profitable, sustainable businesses
  • Dividend guidance for FY21 stood at 7.60cps, assuming no further deterioration in economic conditions due to COVID-19

 

Stock Information

On 17 June 2020, IPL stock closed the day’s trade at NZ$ 1.790, in line with the previous close, with a market cap of nearly NZ$658.96 million. The P/E ratio of IPL was noted at 17.210x with a gross dividend yield of 5.239%.

 


Disclaimer
The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. The above article is NOT a solicitation or recommendation to buy, sell or hold the stock of the company (or companies) under discussion. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site.

 

   
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