Aventus Group

AVN Details

Net Portfolio Valuation Increase: Aventus Group Limited (ASX: AVN) manages large format retail property assets. The Group consists of the Aventus Retail Property Fund (“ARPF”) and Aventus Holdings Limited (“AHL”) and their controlled entities. As of 30 June 2021, the market capitalisation of AVN stood at ~$1.81 billion. On 23 June 2021, AVN announced a $0.0437 unfranked dividend per security for the June quarter. AVN reports 30 June 2021 as the record date and 26 August 2021 as its payment date.  On 23 June 2021, AVN announced a net portfolio valuation increase to $2.3 billion (initial unaudited figure), up by 12% on a Q-o-Q basis as of 30 June 2021. The Group has registered a portfolio valuation gain of $550 million (up by 30%) in the last four years.

Key Takeaways from 1HFY21: The company reported $87 million in revenue in 1HFY21, up by 0.1% YoY. Its net profit after tax (NPAT) increased to $103.4 million in 1HFY21, up by 43.8% YoY. AVN held a cash and cash equivalents balance of $11.3 million as of 31 December 2020.

Revenue & Net Income Trend from FY17-FY20; (Analysis by Kalkine Group)

Key Risks: The company faces a host of financial risks such as market risk (interest rate changes), credit risk, and liquidity risk due to its real estate business activities. The ongoing COVID-19 market uncertainty may also affect the key drivers of property valuations and lower the rental collections.

Outlook: AVN has provided a preliminary estimate of Funds from Operations (FFO unaudited) of 19.4 cents per share for FY21, representing an increase of 7% YoY (relative to previous guidance of 4% increase). This upward revision is due to the continued robust portfolio performance, as well as reduced cost of debt.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of AVN gave a positive return of 35.59% in the past nine months and a positive return of 53.11% in the past one year. The stock is currently trading higher than the 52-weeks’ average price level band of $1.975 - $3.240. We have valued the stock using the Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price with a correction of high single-digit (in % terms). We believe that the company can trade at a slight discount than its peer median, considering its higher debt to equity ratio and low current ratio in 1HFY21, and the risks associated with the COVID-19 uncertainty, abatement of rental collections, and interest rate changes. For this purpose, we have taken peers like Stockland Corporation Limited (ASX: SGP), Mirvac Group (ASX: MGR), Ingenia Communities Group (ASX: INA) and others. Considering the high trading levels, high debt to equity ratio in 1HFY21, decent price movement in the past few months, and valuation, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $3.200 (as on 30 June 2021, 11:24 AM GMT+10), Sydney, Eastern Australia).

AVN Daily Technical Chart, Data Source: REFINITIV 

Finbar Group Limited

FRI Details

Financial Highlights of 1HFY21: Finbar Group Limited (ASX: FRI) is the leading builder of the apartment in Western Australia and is involved in building medium to high-density residential apartments and commercial properties. As of 30 June 2021, the market capitalisation of FRI stood at ~$231.30 million. On 29 June 2021, FRI announced that Director Mr Ronald Chan now holds 242,584 securities directly and 16.84 million shares indirectly. He acquired 1.50 million shares for $1.26 million in an off-market transaction. The company reported an NPAT of $4.02 million in 1HFY21 versus $6.64 million in 1HFY20. FRI’s Pelago residential assets in Pilbara are reported to be 100% leased (total occupancy) and have higher asset book values due to robust rental demand in 1HFY21.

FRI generated positive net cash flows of $11.84 million from operating activities in 1HFY21. It declared a fully franked interim dividend of $0.02 per share. FRI has no debt on its residual stock. It held a cash balance of $31.5 million as of 31 December 2020.

Revenue & NPAT Trend from FY16-FY20; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of the COVID-19 uncertainty and lower demand for its residential and commercial stock. It faces the risk of property valuation changes and adverse interest rate climate, which may impact its earnings and profitability.

Outlook: The company has a project pipeline of $469 million under construction, development sanction for an estimated $544 million and another $335 million of an unapproved pipeline. FRI expects robust cash flows from the sale of its debt-free completed stock.

Stock Recommendation: The stock of FRI gave a positive return of 36.0% in the past nine months and a positive return of 21.42% in the past year. The stock is currently trading above the 52-weeks’ average price level band of $0.610 - $0.960. On a TTM basis, the stock of FRI is trading at an EV to Sales value multiple of 1.8x, lower than the industry (Real Estate Operations) median of 8.3x, thus seems undervalued. Considering the growing buyer demand across its property portfolio, earnings contribution from the Pelago and Fairlanes properties, a pre-sales order book for 2021, secured pipeline of projects, expected completion of Dianelle project in Q1FY22, valuation on a TTM basis, and associated risks of a slowdown in demand and property valuations, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.850 on 30 June 2021.

FRI Daily Technical Chart, Data Source: REFINITIV  

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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