Finbar Group Ltd

FRI Details

Finbar Group Ltd. (ASX: FRI) is a property development company engaged in the development of medium to high-density residential apartments and commercial properties in Western Australia. It has over 71 landmark properties ranging from premium fixtures and fitting to resort-style facilities.

Key Business Updates:

• Change in Director’s Interest: As per the announcement on December 01, 2021, Mr Ronald Chan acquired 18,185 indirect shares for a total consideration of $14,184.30. Total shares held after the change amounts to 17.548 million.
• Garden Towers JV Project: FRI received development approval for the proposed Garden Towers JV apartment development on the eastern edge of the Perth CBD. Garden Towers is a $207 million single-stage project comprising 331 apartments and is expected to launch in early April 2022.

A Quick Look at 2021 AGM Presentation:

• It had clocked 25 years of consecutive profitability. Its FY21 net profit hit a 25% growth to reach $8.86 million.
• Sabina, Palmyra, Riverena, & Vue Tower projects remained the top revenue generators.
• Corporate costs went up to reach 3.2% of net equity in FY21 owing to the consolidation of Finbar to Rent and Finbar Sales division into total admin costs.
• It had closed the period with a cash balance of $52.6 million. It is likely to commence Aurora & The Point project in FY22.
• FRI distributed a full-franked dividend of $0.04 per share in FY21.
• The company had nil project development related debt. It had repaid $9.2 million Riverena debt and $21.6 million line towards the Dianella project. It is expecting to draw down debt under Civic Heart in February 2022.

Cash Balance Trend (Source: Analysis by Kalkine Group)

Key Risks: FRI is exposed to risks related to repricing of properties to be seen in the wake of quantitative tightening measures globally. Increasing virus spread and lockdown fears may widen the vacancy rates and affect rental income. Roll-back of government grants may affect volume growth.

Outlook: FRI has $1.39 billion of residential projects in the pipeline. It has $495 million under construction and $231 million construction to commence in FY22. On completion, Applecross and Rivervale projects to show strong bookings. The management is expecting recovery in key markets such as Karratha for rental demand is likely to support its 101 apartments.

Stock Recommendation: Over the last six months, the stock has been corrected by ~12.85%. The stock is trading closer to its 52-week low price of $0.750. On a TTM relative valuation basis, FRI is valued with an EV/Sales multiple of 2.3x, as compared to the industry median of 8.5x (Real Estate Operations), signalling the stock is undervalued at current levels. Considering the launch of Garden Towers JV project in April 2022, the healthy pipeline for residential projects, deleveraged balance sheet, consistent profitability trend, decent liquidity, valuation on a TTM basis, current trading levels, and key associated business risks, we recommend ‘Speculative Buy’ rating on the stock at the closing market price of $0.780, down ~0.63% as of 17 January 2022.  

FRI Daily Technical Chart, Data Source: REFINITIV

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

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and is subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

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Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the 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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