Abacus Property Group

Abacus Property Group has announced its interim result. Revenue was down 28% to $133m, a fall that reflected profits from prior asset sales rather than any current weakness. Net profit also fell 14% to $40m. Earnings per security fell 18% to 10.4 cents, partly due to the increase in securities on issue following the recent merger discussed in Abacus and Storage Fund to merge from 18 Jan 12 (Long Term Buy – $1.90). The interim distribution was held flat at 8.25 cents, with 16.5 cents expected to be paid for the full year, producing a forecast yield of 8.5%.

Though profits from Abacus’s developments are lumpy, recurring revenue now comprises 80% of the distribution, up from 73% in 2010. That figure will increase as securityholders recently approved Abacus’s merger with its Storage Fund. Although gearing (measured by debt-to-assets) will increase to 31%, it’s still well below covenant limits.

While property prices remain stubbornly low, Abacus remains focused on buying undervalued properties and improving them for resale. The forecast yield of 8.5% provides handy compensation and, in time, increases in the value of its property portfolio should narrow the gap between the security price and net tangible assets per security of $2.43. LONG TERM BUY.

Note: Due to the recent merger Abacus will trade on a deferred settlement basis under the code ‘ABPDC’ until 14 Mar 12 before reverting to its original code ‘ABP’.

Note: The Growth and Income portfolios own shares in Abacus Property Group.