One Real-Estate Stock Possessing Decent Outlook

The COVID-19 pandemic has impacted the global economy and the impact has been felt in various sectors. However, there have been announcements about stimulus packages which are aimed to bring stability. New investment projects are being put on hold or these projects have been cancelled. New Zealand has been at the forefront in managing the crisis.

During the coronavirus pandemic, Monetary Policy Committee used a couple of policy tools in order to reduce interest rates for households as well as businesses. Notably, committee reduced official cash rate (or OCR) to an all-time low of 0.25%. Also, they enacted $100 bn government bond purchase programme. However, there are some companies which have managed to sail through the pandemic and have delivered decent returns amidst significant challenges. This company is focused towards ensuring the sustainability of dividends to the shareholders. Also, the stock of this company has delivered a return of ~28.45% in the time span of previous 6 months. However, in the time frame of past 3 months, the stock rose by ~13.70%.

Argosy Property Limited (NZX:ARG)

Argosy Property Limited is one of NZ’s leading listed property companies, which owns diversified portfolio of industrial, office as well as retail properties primarily in Auckland and Wellington, with the modest tenant-driven exposure to other parts of the country.


  • ARG’s WALT, at the end of 30th September 2020, stood at 5.7 years as well as portfolio occupancy was 99.4%.
  • The company possesses quality portfolio of diversified assets. Notably, business proved resilient as well as is well-placed to deliver a robust performance in the second half.
  • For FY21, the company is targeting dividend of 6.45 cents per share.

Results for 1HFY21

For the six months ended 30 September 2020, the company reported net property income of $51.1 million, in line with the prior comparable period. The company registered like-for-like gross rental growth of 5.2%. The strong gross rental growth was offset by Covid-19 rental abatements as well as lower insurance proceeds at 7WQ.

It provided $3.3 million in rental abatements to tenants as well as $0.6 million in deferrals. The net interest expense increased from $11.1 million in 1HFY20 to $14.2 million in 1HFY21. After non-cash adjustments as well as current tax, net distributable income rose $6.4 million or 21.5%.

Financial Performance (Source: Company Reports)

Desk Top Valuations

The desk top valuations conducted by Colliers led to an interim revaluation gain of $79.8 million, or a 4.3% increase on book values immediately prior to the revaluation. Auckland was the biggest contributor to the revaluation gain with $54.0 million or 68% of the total portfolio gain. By sector, Industrial was the robust driver of the overall gain at $44.1 Mn, up by 5.7 percent. The Office portfolio increased $21.4 Mn, or 2.7 percent as well as Large Format Retail also increased $14.3 Mn or 5.3 percent. Due to revaluation gain, ARG’s NTA has increased to $1.41, reflecting an increase of 8.5 percent from $1.30 at March 31, 2020.

Portfolio at a Glance (Source: Company Reports)

Portfolio Activity During First Half

The company’s WALT, at the end of 30th September 2020, was 5.7 years as well as portfolio occupancy stood at 99.4%. The company completed rent reviews and registered annualised rental growth of 3.8%. On sector basis, the company achieved annualised rental growth of 2.9% for industrial rent reviews, 5.3% for office rent reviews and 2.5% for large format retail rent reviews.

The company has managed to lease 55,997m2 across portfolio over 1H FY 2021, or 10% of the portfolios total net lettable area. Notably, there were 25 transactions, with 10 renewals, 7 extensions as well as 8 new leases.

Lease Expiry (Source: Company Reports)

Financial Position of ARG

At the end of 30 September 2020, the company’s debt-to-total-assets ratio, excluding capitalised borrowing costs, stood at 36.6% as compared to 38.8% on 31 March 2020. This reflects the net impact of development activity during the period, offset by divestments as well as desk top revaluation gains. Notably, ratio also excludes lease liability as well as right of use asset at 39 Market Place of $41.7 Mn, recorded in the period under NZ IFRS 16.

During first 6 months, the company also added a new banking facility, Tranche I, for $75.0 million. This new Tranche expires in the month of May 2024. As on September 30, 2020, the company’s total bank debt facility stood at $660.0 million as well as its weighted average debt tenor, including bonds, was 3.2 years, and the weighted average interest rate stood at 3.74%.

Portfolio Snapshot (Source: Company Reports)


For the rest of FY21, the company will focus on addressing residual expiries within the portfolio and leasing up remaining vacancies. Its portfolio of quality investment properties has a varied tenant composition which provides resilience as well as stability to the cashflows. Such strength and certainty of cashflows are very important to investors. The company stated that its FY 2021 dividend guidance has been increased to 6.45 cents per share, which implies continued sound delivery of the strategy.

Dividend History (Source: Company Reports)

Stock Performance

The stock of Argosy Property Limited ended the trading session at NZ$1.535 per share, which reflects a fall of 0.32% on an intraday basis. Notably, the company has a market capitalisation of ~$1.27 billion as on December 4, 2020.



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