Mirvac: Result 2018
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Is the housing boom over? Plenty of people are calling it, but Mirvac obviously thinks there's life in the old dog yet. Over the next three years the diversified property trust is targeting $1 billion in earnings from residential and commercial developments, with a record 4,000 lots expected to be added to the development pipeline in 2020. On current trends this could be a stretch, potentially leaving the trust with egg on its face and a collection of apartments and land it can't sell.
| Year to June | 2018 | 2017 | /(–) (%) |
|---|---|---|---|
| Distrib. Profit ($m) | 528 | 487 | 8 |
| Distribution (cpu) | 11.0 | 10.4 | 6 |
| Gearing (%)* | 22.2 | 24.3 | (9) |
| NTA per share ($) | 2.31 | 2.13 | 5 |
| * Gearing defined as net debt/(total tangible assets -cash) | |||
For the time being, though, management remains confident and gave guidance for profit growth of 2–4% in the current year and distribution growth of 5%. That follows figures of 8% and 6% for 2018, thanks to rising rents in office and industrial and healthy valuation uplifts on developments.
Given the volatility of development profits, Mirvac has lower quality earnings than most property trusts and we'd expect higher returns to compensate. With the stock on a forward yield of 4.8% and the potential for development hiccups over the next few years, we're close to a downgrade, but for the time being we'll stick with HOLD.
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