Kiwi's Sylvia Park gained from its galleria expansion. Photo / supplied
Analysts have run their rule over the listed property and retirement full-year results from landlords with many billions of dollars of real estate.
Key takeaways from the performance of listed property companies and retirement village developers included Covid disruption, rising construction costs, business direction, development plans, rental income, sales and the rise of online shopping.
Here is a breakdown of what some of the research analysts noted about the results.
Kiwi Property Group
One of the largest listed landlords reported a strong performance, pushing up last year's $196.5 million net profit after tax to $224.3m for the March 31 year. Its big real estate portfolio rose in value $99.8m last year but $120.5m this year.
Forsyth Barr's Rohan Koreman-Smit said Sylvia Park shopping centre's owner Kiwi had reported a solid performance during another challenging year.
"Portfolio metrics remain stable and retail sales and leasing spreads continue to improve. The key new information with the result is Kiwi's plan to find a capital partner to co-invest in its office portfolio," he said.
That was in line with its strategy to grow asset management earnings and will also provide balance sheet capacity to fund its extensive development pipeline.
The office co-investment is expected to occur later in the current 2023 financial year but further details were limited.
Kiwi offers a large discount to book value and a solid 7.8 per cent gross yield, he said.
But it was still in the early stage of executing on a capital-hungry strategic transformation, initial capital recycling is taking longer than expected, and the consumer outlook is moderating.
Kiwi has build-to-rent apartments at Sylvia Park under construction and plans them at its Lynnmall shopping centre in Auckland too. As well, it got its plan change through for a new town centre at Drury where 60,000 people could live in the next 25 years.
Koreman-Smit has a neutral rating on Kiwi shares.
Ryman Healthcare
Stephen Ridgewell and Rob Morrison of Craigs Investment Partners analysed Ryman's net after-tax full-year profit, up 64 per cent.
"Ryman did not provide earnings guidance for FY23, but did guide for a build rate of about 1000-plus units and beds, a big step up from 706 units and beds completed in FY22 which, if delivered, will be an all-time record," said the analysis headed "Aussie business comes of age".
Ryman's outlook was underpinned by a record level of sales inquiry and an increasingly diverse build programme. The company is now working at 16 sites here and in Australia, compared with 12 last year.
"Ryman also signalled it plans to further increase resale prices in the year ahead, despite house prices softening, reflecting that Ryman units are still priced at a wider than normal discount to local house prices," the Craigs analysts said.
Ryman beat expectations when it announced $692.9m audited reported net profit after tax in the full year to March 31, 2022, up on last year's $423.1m.
Forsyth Barr's Aaron Ibbotson and Matt Montgomerie have a neutral rating on the stock but said it was encouraging to see the company benefiting from what appears to be a more assertive pricing strategy under new management.
Goodman Property Trust
Rising demand for warehouses and logistics centres and strong revaluations drove Goodman's net after-tax profit for the past year up 18 per cent, to $748.6m. The business, with $4.8b of real estate, was boosted by $660.4m revaluations, up on last year's $560m, showing the rising worth ascribed to the type of property the trust specialises in - increasingly popular because of online shopping.
Koreman-Smit headlined his analysis "The show can't go on", writing: "The economics of development are shifting rapidly, with build costs rising 20–25 per cent over the last six months and uncertainty around the valuation of the completed asset."
Cash earnings rose 4.5 per cent on the prior year and in line with Forsyth Barr's expectations.
"Goodman's guidance for FY23 cash earnings of 6.9cps and DPS of 5.9cps was ahead of our expectations and we have adjusted our forecasts accordingly. Under-renting within Goodman's portfolio underpins near-term growth," Koreman-Smit wrote.
"While the topline growth outlook is solid, asset valuations are more uncertain. Higher interest rates are pressuring Goodman's sector-low capitalisation rates, which makes development - a key plank of Goodman's growth strategy - more challenging," he noted.
Oceania Healthcare
The retirement business made $61.1m reported net profit after tax in the March 31, 2022 year, down on the previous $85.7m, although operating revenue shot from $175.1m to $231.1m.
The 2021 result was for 10 months whereas the latest was for the full year.
Forsyth Barr's Aaron Ibbotson and Matt Montgomerie asked if it was time for Oceania to shine. The business had reported a strong result, given difficult circumstances.
Underlying earnings and annuity ebitda were up around 10 per cent, they noted.
"Relative to the other three main listed aged care operators, Oceania is more than two times as exposed to care earnings where funding is currently increasing substantially slower than costs.
"It is also not able to fully capture the all-time high resale gains as it is buying back some independent living units for brownfield development. What Oceania has is a fast-growing, defensive and cash generative care suite earnings stream. Oceania's care suite deferred management fee and resale gains now equal approximately half of Oceania's FY22 annuity ebitda. We have left our $1.55 target price and outperform rating unchanged," Ibbotson and Montgomerie said in their report.
Asset Plus
Asset Plus also reported its full year, down 81 per cent in net after-tax profit. Forsyth Barr's Koreman-Smit said the wait for the settlement of Shirley mall Eastgate in Christchurch continued.
"The divestment was announced in February 2021. The settlement will take place 15 days after issuance of new titles which Asset Plus expects to occur in June," he noted.
The company has earmarked $40m of the $43m sale for debt reduction under revised banking arrangements.
Asset Plus now has a staggered interest cover ratio to keep it compliant with covenants while Munroe Lane completes.
"Where to from here? With development land in Kamo also being marketed for sale, Asset Plus's two remaining assets will have a gross book value of around $190m once Munroe Lane is complete," Koreman-Smit said.
Assuming $20m of debt after the divestment of assets held for sale equates to 47c per share.
"The company currently trades at a 40 per cent discount to its FY22 net asset value of NZ$0.44 per share and 44 per cent compared to our estimate once Munroe Lane is complete. So far the current strategic direction has failed to close this discount."
Jarden analysts Grant Lowe and Vishal Bhula put an overweight rating on the stock which they said was trading below their revised valuation, but they also recognised a difficult
investment proposition over the near term.
Adjusted funds from operation fell 28 per cent after the lease on the company's Graham St office block expired.
Net rental income at $7.7m was down 22 per cent which was in line with their forecasts, with Graham St vacated ahead of planned refurbishment works.
Higher expense interest contributed to a 28 per cent decline at the adjusted funds from operation level.
Rental abatements impacted earnings by $300,000, with $100,000 of that in the second half of the latest year.
Development capex was down on our forecasts with some Covid delays and modest additional costs at Munroe Lane and target completion now April 2023.
Given the low earnings track ahead of Munroe Lane completion, Asset Plus had agreed amendments to its interest coverage covenants ahead of the current facility expiry on September 30 next year, the Jarden analysts said.
Stride Property Group
Rental income rose but so too did its expenses which pushed the annual profit down 14.8 per cent. Net profit after tax from the diversified landlord fell from last year's $131.9m to $112.3m in the year to March 31, 2022. Rent rose from $50.7m to $65.8m after the business bought new office blocks in the 2021 and 2022 financial years.
But corporate expenses rose from last year's $21.1m to $27.4m at the business which last year abandoned spinoff float plans for its Fabric subsidiary.
Arie Dekker and Vishal Bhula at Jarden described it as a "tough year" for the company.
The result was in line with expectations and it was pleasing that total assets under management grew from $3b to $3.6b. But Stride had been unable to list Fabric. It used the extra time to buy the under-construction Carlton Gore Rd office block by Mansons TCLM.
Stride was still looking to progress an unlisted wholesale outcome with Fabric as a pathway for platform growth. The company said there was broad interest in the assets.
Office asset values had held up to date against the prices they were bought for. Stride was attuned to the risks, given changing market dynamics, the analyst said.
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