Mirvac Group

MGR Details

Q3FY22 Financial Update: Mirvac Group (ASX: MGR) is engaged in real estate investment, development, and investment management.

• Residential Sales and Settlements: MGR embarked upon 2,332 residential sales in the financial year to date, with 518 sales executed in Q3FY22. Pre-sales have increased to ~$1.6 billion, and the settled residential lot count stands at 1,645 financial year to date.
• Cash Collection Status and Development Pipeline: The cash conversion improved to 94%. The company progressed a ~$29 billion development pipeline with successful leasing at 80 Ann Street in Brisbane.

Q3FY22 Portfolio Update; Analysis by Kalkine Group

Key Risks and Challenges

The rising interest rates may significantly impact the REIT industry, considering higher lending rates for dwelling purchases. The real estate market holds a significant competition, affecting occupancy rates.

Outlook

Despite the continued headwinds of cost inflation, supply chain constraints, and COVID-19 related issues, the company expects to settle over 2,500 lots in FY22. The group has reaffirmed operating EPS guidance of a minimum of 15.0 cents per share for FY22.

Valuation Methodology: Price/Earnings 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 MGR gave a negative return of ~24.573% in the past year. The stock is currently trading lower than the 52-weeks average price level band of $2.130 - $3.180. The stock has been valued using the Price/Earnings multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). Considering the improved development pipeline and pre-sales, the company might trade at a slight premium to its peers’ Price/Earnings multiple average. For valuation, a few peers like Abacus Property Group (ASX: ABP), Irongate Group (ASX: IAP), Charter Hall Long WALE REIT (ASX: CLW) and others have been considered. Given the decent financial prospects, improved lot settlements, development pipeline, current trading levels, and upside indicated by valuation, we give a “Buy” recommendation on the stock at the closing market price of $2.210, as of 03 June 2022.

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.

MGR Daily Technical Chart, Data Source: REFINITIV

Finbar Group Limited

FRI Details

H1FY22 Financial Performance: Finbar Group Limited (ASX: FRI) provides medium to high-density residential buildings and commercial property developments in Western Australia.

• Operating Metrics: FRI registered an NPAT of $9.6 million during H1FY22, up from $4.02 million in the corresponding prior period. The 2022 result was supported by a surge in Finbar’s Pelago investment asset value.
• Construction Progress: Construction at the landmark Civic Heart project in South Perth has clocked level 1 of the above-ground podium, with progress continuing to the four-level podium.

H1FY22 Operating Metrics; Analysis by Kalkine Group

Key Risks and Challenges

Lockdown and mobility restrictions may put pressure on vacancy rates affecting volume offtake. Demographic shifts, elevated household savings ratio, and rising unemployment levels may pressure the demand side.

Outlook

The construction of two significant projects, Civic Heart in South Perth and AT238 in the Perth CBD, have showcased continuous progress, with Civic Heart expected to complete by FY24 and AT238 to achieve by FY23.

Stock Recommendation: The stock of FRI gave a negative return of ~13.030% in the past year. The stock is currently trading lower than the 52-weeks average price level band of $0.710 - $0.920. On a TTM basis, the stock is trading at an EV/Sales multiple of 1.8x compared to the industry median of 13.9x (Real Estate Operations). It indicates that the stock is undervalued at current trading levels. Given the elevated levels of dwellings approved, decent project progress, profitable status, current trading levels, upside indicated by valuation, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the closing market price of $0.717, down by ~1.034%, as of 03 June 2022.

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.

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 depend on the investors’ appetite for upside potential, risks, holding duration, and previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

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

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