Australand Holdings
Recommendation
Australand Holdings’ security price is up 27% since our original upgrade in Pouncing on downtrodden developers on 22 Jan 10 (Long Term Buy – $2.375) and 9% above our previous Long Term Buy price limit of $2.75. For an income stock like Australand, capital gains are like receiving years of distributions in advance.
We’ve reduced the prices in the recommendation guide, as higher interest rates might delay a turnaround in Australand’s residential division. The unfranked forecast yield of 6.8% is also unattractive next to those of much stronger franchises, such as Woolworths and Westfield, which offer stronger growth prospects and more protection against a downturn. The Australand ASSETS also offer more value, although they too are on the cusp of being downgraded to Sell.
Buy | Up to $2.00 |
Long Term Buy | Up to $2.60 |
Hold | Up to $3.20 |
Sell | Above $3.20 |
Australand will go ex a 10.5 distribution on 23 December, and will be officially included in the S&P A-REIT indices from 20 December, which might elicit purchases from various property funds. But as the security price approaches $3.20, the reasons for selling increase. The security price has increased 6% since Listed property sector review – Part 4 on 15 Sep 10 (Hold – $2.83) and, with one eye on the exit, we’re sticking with HOLD.
Note: The model Growth and Income portfolios own securities in Australand.