Real Estate

Mirvac up 4% after beating guidance and consensus at full year FY22

By Market Index
Thu 11 Aug 22, 4:33pm (AEDT)
Build to rent apts
Source: The Urban Developer

Key Points

  • Mirvac' FY22 operating profit jumped 8% to $596m
  • The group matched the 5.1 cents per share dividend it paid in the first half
  • Plans to dispose of $1.3bn in office and retail properties this financial year

Despite posting below consensus FY23 guidance, the market saw sufficient good news within Mirvac’s (ASX: MGR) full year FY22 result to push the property company’s share price 4% higher in mid-afternoon trade.

While the group’s revenue surged 27.5% to $2.3 bn in the 2022 financial year, operating profit jumped 8% to $596m.

Overall, revenue growth was offset by a 48% increase in development costs to $1.15bn.

The group matched the 5.1 cents per share (CPS) dividend it paid in the first half, bringing the total distribution for the year to 10.2 cps, an increase of 3% on the previous year.

Due to strong demand for industrial assets, Mirvac investment property portfolio was revalued by $305m.

The company is targeting operating earnings of at least 15.5 cps in FY23 and distributions of at least 10.5c.

Highlights with today’s result:

  • $12.4bn in commercial and mixed-use developments currently in train

  • $1.8bn in potential development value creation

  • Occupancy of 97.3% across the investment portfolio

  • Gross margins of 25% for the master-planned communities’ portfolio, up on the targeted 18 and 22%

  • Net tangible assets of $2.79, up 4%

  • Operating EPS of 15.1cpss, up 8% on FY21

  • Residential delivered earnings (EBIT) of $195m, up 16%

Despite headwinds

CEO Susan Lloyd-Hurwitz notes that despite the ongoing impacts of covid, supply chain issues, labour shortages, rising inflation and interest rates, the group still managed to deliver a strong financial and operational result ahead of guidance.

“… demonstrating the continued resilience of our people and the value of our integrated and diversified business model,” she said.

“We progressed our substantial development pipeline, improved the quality of our investment portfolio, secured new capital partners, and achieved our ambition to be net positive for our scope 1 and 2 emissions, nine years ahead of our target.”

Major selloff

In an attempt to rebalance its investments to reflect ‘tenant and capital demand for modern, sustainable real estate, Mirvac announced plans to dispose of $1.3bn in office and retail properties this financial year.

Lloyd-Hurwitz described the planned sell-down as an attempt to further improve the group’s portfolio quality as it refocuses investments in the industrial and build-to-rent sectors.

Outlook

Lloyd-Hurwitz expects fundamentals of low unemployment, tight residential vacancies and a return of overseas migration to continue supporting the sector.

“Our apartment projects are expected to complete into an undersupplied market, positioning us well to capture demand,” noted Lloyd-Hurwitz.

“Our brand, focus on owner-occupiers, diversity of product, and reputation for quality, will help us to remain resilient in a rising interest rate environment.”

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Mirvac share price snapshot over six months.

 

What broker think

Mirvac share price is down -27% over one year.

Consensus on Mirvac is Moderate Buy.

Based on Morningstar’s fair value of $2.80 the stock appears to be undervalued.

Based on the six brokers covering Mirvac (as reported on by FN Arena) the stock is trading with 12.4% upside to the target price of $2.43.

Based on a more severe housing market downturn than expected, Goldman Sachs maintains a Neutral rating and target price of $2.38.

While FY23 eps guidance of at least 15.5c was slightly below consensus of 15.8c, Citi expects the group to exceed these expectations, especially given the higher debt cost and lower residential lot volume assumptions.

The broker retains a Buy rating, a target price of $2.50 and is forecasting a full year FY22 dividend of 10.20 cents and EPS of 15.30 cents.

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