Lens over House Prices and 4 NZX Stocks 

  • July 08, 2020 02:42 PM NZST
  • Team Kalkine
Lens over House Prices and 4 NZX Stocks 

Summary

  • REINZ report showed a rise in confidence in the real estate market, though tough times hover around the NZ economy
  • May figures revealed that the number of properties sold have increased during the month and listings have indicated signs of returning to normal levels
  • Share prices of Investore property, Kiwi Group and Property for Industry have soared 33%, 36% and 47.5% respectively after reaching record lows in March

New Zealand housing market has remained buoyant post-COVID-19. New property listings have been coming up in all regions in June showing that kiwis are increasingly putting properties on sale.

The Real Estate Institute of New Zealand (REINZ) Market confidence report showed that there have been signs of a rise in sales volumes, listings, sales by auction and sales price to valuation during May while median prices are up in some places and flat or down in others as per expectations.

Bindi Norwell, Chief Executive of REINZ stated that the number of properties sold have risen throughout the month while listings have shown signs of returning to more normal levels.

She added that the median days for selling a property have gone up due to persistent impact of Alert level 4 lockdown. Data from Reserve Bank has also shown that lending has soared by 57.1% compared to April for all types of borrowers but remains low by 33.3% if compared to May 2019 showing lending has started to gain momentum but will take some time to reach previous levels.

Volatility is expected to continue in the New Zealand market, especially in areas heavily dependent on tourism with no signs of reopening of borders for international holidaymakers any time soon. The top end of the market is expected to hold up for now as more ex-pats come home, but the impact on pricing remains ambiguous.

Let’s have a look at 4 NZX stocks under discussion-

Investore Property Limited (NZX: IPL) shares have rallied 3.4%, from a low of NZ$1.39 on 23 March to NZ$1.84 on 7 July. FY20 has been a positive year for Investore as it delivered positive underlying financial performance. Investors acquired 5 properties with an aggregate purchase price of $147.7 million during FY20. IPL recorded a profit after tax of NZ$28.6 million, a fall of NZ$9.9 million primarily due to lower revaluation movement compared to FY19 for FY20 and an annual cash dividend of 7.6 cents per share in line with the guidance.

Investore has NZ$148 million of undrawn headroom available with a loan to value ratio of 30.4% after paying debt using its capital raising and settlement of acquisition of 3 properties from Stride Property Limited on 30 April 2020. Hence, IPL is well-positioned to continue with its portfolio growth strategy.

Kiwi Property Group Limited (NZX: KPG) shares have surged 38.7% from NZ$0.75 on 23 March to NZ$1.04 on 7 July.

As per the business update provided by the Group on 22 June, the number of visitors to Kiwi Property’s shopping centre portfolio has returned to pre-coronavirus levels. The average pedestrian count increased by 1% on the same period last year since NZ moved to Alert level 2 and regular trading resumed from 14 May.

Comprehensive cost control programs and rent relief measures have been adopted for affected retailers and SMEs. The Group also decided against proceeding with the final dividend for the year ended 31 March 2020 due to coronavirus uncertainty. The company rather intends to pay an interim dividend for the year, and the dividend will include 90-100% of Kiwi Property’s underlying cash flows for the 6-month period to 30 September 2020.

ALSO READ: Property Development: Lens on 3 NZX-Listed Property Stocks

Goodman Property Trust (NZX: GMT) shares have risen 13.6% from NZ$1.88 on 23 March to NZ$2.135 on 7 July.

Goodman is a business space provider that is involved in industrial and office services at its estates in Auckland and Christchurch. The Group has persisted in operating through Alert level restrictions providing critical business infrastructure supporting essential supply chains while maintaining health and safety of individuals.

John Dakins, CEO stated that the customer demand in food, online, logistics, consumer goods and the digital economy continued to help portfolio essentials and targeted development activity. GMT recorded a statutory profit of NZ$284.4 million before tax compared to NZ$334.8 million before tax previously.

Mr Dakins has forecasted cash earnings to be consistent with 2019 at 6.2 cents per unit for FY21. The Board has also modified the distribution policy for the Trust by implementing a target payout ratio between 80%- 90% of cash earnings.

The chairman of GMT asserted that amid deteriorating economic outlook in the past 3 months due to COVID-19, the quality of the Trust’s NZ$3.1 billion portfolio, focus on the industrial sector and low gearing level will help the Group in responding to any challenges in future.

Property for Industry Limited (NZX: PFI) shares have rallied 48.8%, from a more than 2 year low of NZ$1.61 on 23 March to NZ$2.375 on 7 July.

PFI has worked on a range of solutions with tenants that include reduction of a proportion of rent for PFI’s smallest tenants who are affected by NZ government lockdown, rent deferrals with other tenants and broader lease discussions.

As per its business update dated 8 May, PFI remains well placed to take benefit of the low-interest rate environment. The impact of coronavirus on PFI’s earnings remains dependent on the extent and duration of COVID-19 uncertainty.

PFI intends to pay its dividend continuously on a quarterly basis until the company is in the position to do so.

 


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