Stock Details
 

Aveo Group (ASX:AOG) 

Upgrade of FY18 Earnings- Aveo Group is an Australia-based company and its principal activities include investment, development and management of retirement villages, development for resale of land and residential and other activities as well. Recently, the Group upgraded its FY18 earnings and now it expects underlying EPS to be 21.6 cps, up from 20.4 cents per security (cps) which was due to higher than expected development profits arising from the Group’s flagship retirement community development at Newstead, Brisbane. EPS growth is now expected to be 14 per cent higher than the reported FY17 EPS of 18.9 cps and confirmed that its FY19 EPS is expected to be 20.4 cps, in line with its initial FY18 guidance. Aveo also announced that the estimated distribution for the year ended 30 June 2018 will be 9 cents per stapled security, within the guidance of distributing 40 to 60 per cent of underlying profit after tax. Aveo Group’s Distribution Reinvestment Plan (DRP) remains suspended. After the recent slowdown in the residential market in most Australian states the Board believes it is prudent to reduce forecast FY19 new units delivered from the annual target of 500 to 418 and reduction in development profit will be more than offset by Aveo’s Established Business resales. Meanwhile, the share price has fallen 10.29 per cent in the past six months as at 4 July 2018 and recovered marginally in last five days. The stock is trading close to the 52-week low level that is $2.25. We give a ‘’Buy” recommendation at the current market price of $2.42 as the Group is on track in delivering its financial and operational metrics for FY18 so that it remains to be Australia’s leading and most innovative senior living provider. Further, the group is expected to benefit from the ageing Australian population.
 

 
Company’s pipeline (Source: Company Reports)
 

G8 Education Limited (ASX:GEM) 

Benefits from new Government funding package expected - G8 Education is a childcare centre operator providing developmental and educational child care services mainly in Australia. With growing population, more participation from female workforce and supportive government funding, the group is expected to see a recovery in its performance in medium to long term. The Group lately removed the trade volume restrictions applicable to shares held by CIP and these were not applicable anymore from close of trade on 4 June 2018 as initially shares held by CIP as at the date of completion of the revised tranche 2 placement were subject to voluntary trading volume restrictions for a period of 12 months.

It was observed that prior year acquisitions continued to grow occupancy and are expected to deliver earnings in line with expectations for the full year. The Group aims to achieve a portfolio of outstanding early childhood education brands. The Group acquired a total of 37 early education centres and disposed of 22 centres in Australia. It is expected that the market environment will be challenging for a number of months yet, as the impact of recent supply increase can be felt, and the Government funding package is expected to drive demand in the sector from July 2018. Its 32 per cent of centres were assessed and exceeded the National Quality Standards and its average portfolio quality continues to improve.  Moreover, the ROE improved from 4.2 per cent as on 30 June 2017 to 5.9 per cent as on 31 December 2017. The share price has been falling for 5 years but started recovering since one month. The stock was down by 1.66 per cent as on 4 July 2018.  We recommend to “Hold” the stock at the current market price of $2.36 as the Group believes that its customer relationship management will help it to face any kind of challenges.

 

 
Group’s current footprint (Source: Company Reports)

 
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