Finbar Group Limited (ASX: FRI) reported a net profit after tax of $11.0 million, during first half of the 2015 fiscal year, driven from the Spring View Towers project completion at Rivervale which witnessed 164 settlements. Accordingly, the group paid off over $52.6 million for project specific debt. The second half of 2015 fiscal year net profit is expected to be generated from Toccata and Subi Strand projects completion. Meanwhile, Finbar delivered a financial year to date (as of feb 2015) sales activity of 332 worth $226.5 million, with the average being 1.4 sales per $943,000 per day. The group already has 630 pre-sales contract worth of $428.1 million across all projects, which is almost 65% increase as compared to the corresponding period of last year. 


Contract Activity (Source: Company Reports)

The group has a solid financial position with cash of $11 million and is well funded to deliver its potential approximately $2 billion project pipeline. Meanwhile, Finbar launched a public marketing of $120 million for Aurelia project in South Perth. The group declared a fully franked interim dividend of 4.0 cents per share.


Debt and Pre sales coverage (Source: Company Reports)

On May 2015, the group finished the Subi Strand project worth 164.7million, while the firm had already generated $124.6 million of sales. The project has 245 apartments and 19 commercial lots, and the revenues from this project would be reflected during the Second half of the fiscal year. The group acquired 103 Mill Point Road for its Civic Triangle development at South Perth, for an enriched architectural outcome along with its present heritage buildings. The property has Australia Post building on 1,019 square meter land. Civic Heart development has a total of 8,225 square meters of land area. Finbar purchased earlier Port Hedland Hospital Site for $5.95 million, and the firm will be developing around 680 apartments and 2,300sqm of commercial space, under four development stages. The group also purchased a mixed use development site at South Perth for $7.25 million. This project will have around 56 apartments plus ground floor retail and level one office space and the group estimates the project cost to be over $60 million.

Finbar finished its Toccata project worth of $85.7million, on track with its estimate completion, and had already secured $73.7 million in sales. The project has 45 apartments and 2 commercial lots. Meanwhile, the settlements from the pre-sold apartments will be reflected on the second half of the fiscal year 2015.

Quite recently, the group go the development approval for its Sunago Joint Venture residential project in Dianella. The company will get 50% of project profit plus management fee, wherein the forecasted project end value is around $72 million. The project will have 163 one and two bedroom apartments with facilities. The group will begin development from 2016 while the marketing activities will start by September 2015. Meanwhile, the company is seeking to launch its prestigious at South Perth, 38 level Civic Heart project worth around $400 million.


Pipeline of projects (source: Company Reports)
 
Outlook
Quite recently, Finbar announced that the group’s full year profit after tax is forecasted to be around $25.5 million for the total fiscal year of 2015. Although this is a decline, against the comparable period of last year, we believe that this is a decent outlook, given the challenging market conditions. Moreover, the company has successfully improved its cash position to around ~$69 million as compared to the period ending on the first half of 2015, to maintain its working capital. Finbar had reported record high pre-sale contracts and the group’s marketing efforts for its projects will keep continuing. For the second half of the fiscal year, the group started developing Unison on Tenth, Aurelia and Linq, and projects. Moreover, Arbor North, Norwood, and Concerto projects are already under construction. Finbar also declared a final dividend of 6 cents per share, following the 4 cent interim dividend paid during April 2015. The group has thus maintained its annual dividend of 10 cents per share for FY15.
 
We believe that the group’s record pre-sale contracts, solid balance sheet, strong pipeline of projects and also timely completion of the projects would boost its earnings going forward. The stock has a high dividend yield of 7.87% and an attractive P/E of         10.07 x. Although the stock delivered a negative year to date returns of 1.92%, the shares have rallied around 7% for the last four weeks, boosted by its new property acquisitions, and project completions.
 
Accordingly, we give a “BUY” recommendation on the stock at the current price of  $1.27.

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