AOG Details

Aveo Group (ASX: AOG) was one of the best performers on ASX on December 22, 2017 zooming up 4.28% prior to Christmas weekend.

In a move to capitalise on the assets for higher returning development projects, the group has lately sold its Gasworks Plaza complex (mixed-use development) in Newstead, Brisbane, to AMP Capital for an effective price of $248.4M in a competitive process. The sale contract will be settled in February 2018 for Gasworks 1 & 2, and in September 2018 for Gasworks 3 on its completion. The sale has been highlighted to generate a surplus of $61M after allowing for Gasworks Plaza’s carrying amount of $180M in the company’s balance sheet at 30 June 2017, transaction and other costs, and income tax. This will eventuate in an increase in net tangible assets per security of 11 cents. The group has also indicated for practical completion of Aveo Newstead, a 19-storey world class retirement living tower, in May 2018.


Improvement in Retirement Earnings (Source: Company Reports)
 
2017 was a strong year for the group and marked the completion of the delivery of its new aged care facility at Durack. Group’s FY17 land sales contracts on hand were high at 396 but below 646 of FY16 representing passing of the peak production and sales years for land sales while the group heads to the run out in FY20. Non-retirement assets reduced to only 13% of total assets. AOG’s FY17 underlying profit after tax was $108.4m, up 22% over FY16. Underlying EPS increased by 11% to 18.9 cents per security. The group has maintained its guidance for FY18 (EPS growth of 7.9%) with improved sales level and is gearing for deliveries of retirement development pipeline in FY20.

We give a “Buy” on the stock at the current price of $2.68

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