Mirvac: Result 2017
Recommendation
Mirvac has reported an 11% increase in full-year profit to $487m, at the top end of guidance. This allowed the trust to raise distributions by 5% to 10.4 cents per unit. There was also an 11% uplift in net tangible assets per share due to the buoyant property market and a valuation increase from newly completed developments.
Year to June | 2017 | 2016 | /(–) (%) |
---|---|---|---|
Distrib. profit ($m) | 487 | 438 | 11 |
Distrib. per share (c) | 10.4 | 9.9 | 5 |
Gearing (%)* | 23.4 | 22.9 | 2 |
NTA per share ($) | 2.13 | 1.92 | 11 |
* Gearing defined as net debt/(total tangible assets – cash) |
Mirvac is unusual in the listed property sector, where trusts tend to specialise in owning particular types of real estate, such as office towers or shopping centres. Mirvac not only owns a diverse portfolio of office and retail assets, but is also a large developer of residential apartments. Typically, the outperformance of one sector tends to be offset by problems in another, but for 2017 everything worked for Mirvac.
The highlight in the result, though, was the performance of its residential developments, which delivered a 54% profit increase courtesy of completed developments and record lot sales in projects primarily located in Sydney and Melbourne.
Six months ago in our results round-up we were concerned about the potential for buyers to fail to complete on apartment purchases, but there was no evidence of this in Mirvac's latest result. We do note, though, that Mirvac still has a high exposure to offshore buyers requiring Australian government approval prior to completing a purchase.
Management expressed confidence for 2018, providing guidance for profit growth of 6–8% and distribution growth of 6%. That would put the stock on a forward distribution yield of 4.8%, which is beginning to look relatively expensive given the group's development exposure and potential for hiccups across the cycle. HOLD.