Just enough
1H23 RESULT
Need To Know
- Earnings in-line with consensus, ex benefit of one-off items
- No change in FY23 guidance. Key residential settlement guidance maintained at >2500, with larger skew to 2H23.
- CEO transition in March 2023 leaves guidance vulnerable to a management reset.
Result
Only just enough. Headline earnings beat, driven by one-off items. The underlying result was in-line with market expectations. We question underlying quality of the result with cap rates holding firm (despite higher bond yields) and materially increased skew to 2H23 residential property settlements to meet FY23 guidance.
Result Highlights
- EBIT of A$387m was in-line versus consensus at ~A$390m.
- EPS inline at 7.7cps (15.5 is full year guidance)
- DPS inline at 5.2cps (10.5cps is full year guidance)
- Gearing lifted slightly to 24.5% (the midpoint of target range 20-30%)
No Change in FY23 Guidance
- EPS at 15.5cps, DPS at 10.5cps
- Residential settlement guidance maintained at >2500
Management appears to have done just enough to meet market expectations. It was largely expected that a slowdown would occur in residential and commercial development due to rising interest rates and wet weather in 1H23.
The re-iteration of guidance may prove optimistic with the RBA expected to tighten policy further from here, and the potential for new CEO to reset the business.
The earnings outlook into FY24 remains just as murky, despite expected new product launches. Office and residential assets are yet to see any cap rate expansion, something which MGR suggest will occur 2H23.
MGR is trades at an 12mth PER premium to its peers at 16x (vs 14x AREIT average), whilst on price to book measure the 15% discount is in-line with sector average. We rate MGR a Hold. In our view, most of the concern around property and housing cycle is currently reflected in the share price.
Figure 1: MGR PER premium to AREIT sector.
Figure 2: Discount to book value in-line with peers
Stock Overview
Share Price
Company Overview
Mirvac Group is an Australia-based company that is engaged in real estate investment, development, third-party capital management and property asset management.
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