Australand Holdings

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For the detail behind our positive view of Australand, you’ll find our recent full reviews laid out on the Australand company page. For income investors in particular, our discussion of the Australand ASSETS income securities might also be useful.

Australand has announced a 10% fall in revenue, to $282m, for the half year to 30 June (Australand has a calendar year end). Though the underlying profit of $60m was in line with both 2009 and previous guidance, management reiterated that it expects to deliver a full year profit of around $120m (in line with 2009). A 10 cent distribution (ex date 24 Jun) has already been declared.
A small decrease in capitalisation rates slightly increased the value of Australand’s portfolio of office buildings and industrial sheds. That the portfolio remains almost fully tenanted provides a level of comfort that both ordinary and Australand ASSETS securityholders will continue to bank healthy distributions. Furthermore, management was upbeat about the prospects for the commercial and residential development divisions in 2011, which have fared poorly recently.

Recommendation guide

Buy	Up to $2.00
Long Term Buy	Up to $2.75
Hold	Up to $3.75
Take Part Profits	Above $3.75

Australand currently trades at a 24% discount to net tangible assets (NTA) per security of $3.44. NTA is likely to increase in 2011 as cap rates decrease further and revaluations are booked on $311m of buildings that are due to be completed and added to the $2bn property portfolio. Gearing also remains comfortable. But although Australand recently rolled over its debt facilities, we’d prefer it if the company could tap credit markets, where maturities are longer and covenants less onerous. Still, the discount to NTA and 7.9% distribution yield is enough to warrant sticking with LONG TERM BUY.