Eureka Group Holdings Limited

 
Improved Occupancy Rate driven by 5 Pillar Plan:  Eureka Group Holdings Limited (ASX: EGH) provides independent rental accommodation to independent retirees who are supported by the Australian Government pension. Recently, EGH informed that the voting power of NAOS increased from 10.57% to 13.73%.
 
Operating Highlights FY19 for period ending 30 June 2019:  EGH declared its FY19 full-year reports wherein the company reported revenue from ordinary activities at $25.79 million, up 14.2% from previous year.NPAT, during the period stood at $6.79 million as compared to a loss of $0.28 million in the previous year. EBITDA from core operations came in at $7.83 million as compared to $7.05 million in FY18, representing an improvement of 11.1% on FY18. Operating cashflow during FY19 stood at $4.75 million, up 13% on y-o-y basis. The company reported occupancy rate at 91% as on 30 June 2019. The Company reported net debt at $46.2 million, 14% lower in comparison to FY18. During the end of FY19, the company initiated its sales program for strata titled units at the Terranora property and reported 10 settlements to date, generating sales of $2.86 million. During the year, the business also added 5 contracts with $1.45 million revenue.
 

FY19 Financial Highlights (Source: Company Reports)
 
Quarterly Update for the period ending 30 September 2019: EGH reported healthy growth in EBITDA and net profit during Q1FY20. The company reported increase in occupancy rate to 93% from 91% as at June 2019, aided bybenefits received from new initiatives under the 5-pillar plan.
 
Dividend Announcement: EGH has paid a fully franked dividend of AUD 0.01000 on 17 October 2019. The annualized dividend yield of the stock stands at 3.45%.
 
Outlook:As per the FY20 guidance, EGH expects EBITDA at circa $8.0 million, excluding the impact of asset revaluations and sales at Terranora. The company is looking forward to development of a marketing strategy including through digital channels along with continuous product improvement to maintain high occupancy and grow rental income. The company is further aiming to fully integrate finance and operations systems to capture efficiencies and facilitate cost effective scalability of the business. The company expects the business to maintain the above growth momentum throughout FY20. Further, EGH is likely to invest in the information technology platform, with benefits coming in from FY21.
 
Stock Recommendation: The stock of EGH is quoting at $0.330 with a market capitalization of $75.91 million. 52-week trading range of the stock stands at $0.245 - $0.330 and currently, the stock is trading at the upper end of the range. The stock has delivered returns of 17.86% and 24.53% during the last three months and six months, respectively. The stock price is up by 10% during the last five trading sessions. The stock is available at a price to earnings multiple (P/E) of 11.19x on trailing twelve months basis (TTM).During the September quarter, the company reported encouraging results with EBITDA and NPAT exceeding the budget. The company is investing in marketing initiatives which are expected to provide an upturn in occupancy over time. Other plans in pipeline include commencement of an acquisition program in 2HFY20 and feasibility for a redevelopment opportunity at the Wynnum village, expected to add further units to the village in FY21. Given the recent price movement, development plans in pipeline and current trading levels, we have a watch stance on the stock at the current market price of $0.330 as on 11 November 2019 and suggest investors to wait for better entry level.

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