Sure s W69. Onwards and Upwards thou little steps at a time.
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For Bars Review.
Arvida Group's (ARV) semi-annual investor update was on the whole, positive. It delivered: (1) strong resale gains, driven by both solid unit sales and margins, and (2) illustrated net debt was tracking better than our expectations. We were also encouraged by the reduced FY25 build guidance, suggesting a focus on reducing debt and realising the potential of its Arena acquisition. A sensible prioritisation given how the stock is currently valued. On the negative side was slightly weak new unit sales. But alongside this ARV provided some positive outlook comments that it has ‘started to see an up tick in settlement activity’ and applications are up >+20% year-on-year. We increase our target price to NZ$1.30, NEUTRAL.
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NZX Code ARV Share price NZ$1.18 Target price NZ$1.30 (from 1.21) Risk rating Medium C&ESG rating B Market cap NZ$854m Avg daily turnover 431.2k (NZ$481k)
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Financials: Mar/ 23A 24E 25E 26E Rev (NZ$m) 318.9 352.5 355.4 381.9 NPAT* (NZ$m) 88.0 88.0 71.1 77.0 EPS* (NZc) 12.2 12.2 9.8 10.6 DPS (NZc) 4.9 3.0 3.1 3.3 Imputation (%) 0 0 0 0
*Based on normalised profits
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Valuation (x) 23A 24E 25E 26E PE 9.7 9.7 12.0 11.1 EV/EBIT 13.9 14.4 16.9 15.4 EV/EBITDA 12.8 13.3 15.3 14.0 Price / NTA 0.6 0.6 0.6 0.5 Cash div yld (%) 4.1 2.5 2.6 2.8 Gross div yld (%) 4.1 2.5 2.6 2.8
What's changed?
- Earnings: Annuity EBITDA increased +18%/+4%/+1% over FY24/FY25/FY26 given higher resale gains while underlying earnings are +21%/-6%/-2% over the same forecast horizon given lower new sale units in FY25/FY26, in-line with the lower build rate
- Target price: Increased to NZ$1.30 (from NZ$1.21) given increased Annuity EBITDA and lowered net debt.
Strong resales a positive sign
The key positive from ARV's update was the strength of its resale gains achieved. Both (1) strong unit sales, up +12% year-on-year for 2H24, and (2) improved resale margins, 31.5% in 2H24 versus 27.1% in 1H24, drove the result. The strength in margins comes despite our MI index suggesting aged care operators have held unit prices broadly flat for the last 18 months. We believe this suggests ARV has sold units with longer occupant times over 2H24, similar to Summerset's recent result. With some of these sales likely from its acquired Arena villages, we view this as a positive that its sizeable embedded value in its portfolio is starting to translate to cash gains.
Net debt controlled well
ARV's indication that drawn debt increased +NZ$27m over 2H24 was ~NZ$30m better than we expected and marks an impressive turn around from 1H24. It appears this result was driven by improved cash collection of sales and the higher resale gains, with deliveries in-line with expectations. We reduce our estimate of net debt growth over the medium term due to its lowered build rate and also aided by the NZ$30m sale of its Timaru village.
Build rate tempered — living within its means, a sensible choice
ARV has indicated a lowered build rate target for FY25. At ~150 units it is comfortably below our prior estimate and the ~200 delivered in FY24, but we believe this a logical move for ARV and illustrates its more conservative approach to capital management rather than a considerable drop in expected demand for its product. Of this 150 units for FY25, ~60% will likely come from its Queenstown Country Club development (care suites and apartments) with the remainder villas.
Thanks GWD
There profit forecast F24 lower than my $91m ..interesting
Well ARV's bounced in the 90's before (in the past few months) but HGH sub $1 today is the lowest its been since the darkest days of April 2020... ARV down 5% in the past year while HGH is down 35% - ARV in a bit of a grey area perhaps, but the days are pretty dark for HGH currently given cap raise was done at $1.00 just a few weeks ago... strange world indeed
Disclosure: sold out of ARV this year at $1.20
Good to hear from you tj.
Yes strange world indeed …how ARV and HGH share prices have performed last year or so is a bit spooky. I don’t think neither of us would have believed 99 cents today
I don’t think HGH is going to recover quickly …going to be dark times for shareholders for a while …maybe both will be sub $1 this time next year …or ARV might get a new life.