Abacus to post rise in full year profit
Recommendation
Abacus Property Group is expecting a full year reported profit of $58m-$61m and an underlying profit of $80m-$83m, a 4-8% increase from 2012. The final distribution of 8.25 cents per share brings the annual total for the 2013 financial year to 16.5 cents, placing the company on a 7.3% yield.
While the yield is attractive, it also reflects the higher risk of Abacus’ business. Unlike ALE Property Group, for example, which has a 100% leased portfolio of 87 pubs on long, triple-net leases (tenant pays all property costs, including capital spending) backed by Woolworths, Abacus has a motley collection of assets across office, storage, industrial and retail property on shorter leases with higher tenancy risk.
It also owns a riskier property development business and highly leveraged legacy unlisted property funds. Abacus also admitted it will have to write off $19m from its Wodonga Land Fund due to falling land sales and prices. Further write-offs are possible but progressively less likely as the unwinding and consolidation of its unlisted funds business nears completion, assuming the Australian economy holds up.
Overall this announcement provides a decent full year result, though we're cognisant that vacancy rates in the office sector are rising and many retailers are struggling. We'll analyse the annual results when they are announced later this month. The share price has slipped 2% since Property stocks on the up (Buy – $2.30) and Abacus remains a BUY.