Ingenia Communities Group
INA Details
Ingenia Communities Group (ASX: INA) is a major owner, operator and developer of communities that provides quality rental and holiday accommodation on Australia’s growing seniors’ market.
H1FY22 Result Performance (For the Period Ended 31 December 2021)
- The group has recorded 8% growth in revenue over the pcp to $131.4 million driven by expansion of residential rental base and CPI linked rent increases. However, this was offset by COVID impacted holidays revenue loss and delayed home construction.
- INA posted a 23% growth in its statutory profit to $39.8 million compared to the pcp, while underlying profit declined to $28.1 million, down by 14% YoY as new home settlements were impacted by supply chain challenges.
- Declared distribution of 5.2 cents per stapled security, up 4% YoY driven by increasing rental cash flows.
Source: Analysis by Kalkine Group
Recent Update
- On 3 March 2022, the company has acquired three lifestyle communities in Melbourne. These acquisitions were part of the $552 million of acquisitions identified with the Group’s $475 million equity raising announced on 1 November 2021.
Key Risks
INA is exposed to interest rate risk, foreign exchange risk, credit risk and liquidity risk arising from the Group’s financial instruments. It is also exposed to the risk of the Covid-19 pandemic that could hurt the operating environment.
Outlook
The group stays in a better position to fund future growth with an overall $378 million in cash and available undrawn debt, providing capacity for further investment in growth. It has guided to achieve EBIT growth in the range of 20% to 25% and underlying EPS growth of 3% to 6% in FY22 over FY21. Development pipeline rose to 6,270 new home sites, an increase of ~50% on June 21. The company highlighted that an expanded development pipeline will enable start of multiple projects over 2022. This would result in fast-track sales growth in line with the Group’s target of 1,800 – 2,000 settlements over three years to end FY24.
Valuation Methodology: Price/EPS Based Relative Valuation (Illustrative)
Technical Overview:
Daily Price Chart
Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)
Stock Recommendation
The stock has been valued using a Price/EPS multiple-based illustrative relative valuation and the target price so arrived reflects a rise of low double-digit (in % terms). A slight premium has been applied to Price/EPS Multiple (NTM) (Peer Average) considering decent result performance in H1FY22, strong demand tailwinds and expanded development pipeline.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
Considering the aforementioned factors along with decent outlook and liquidity position, we give a “Buy” recommendation on the stock at the closing market price of A$4.880 per share, down by 1.415% on 12th April 2022.
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 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.
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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