KPG - Kiwi Property Group Limited

[Habits]

Of the 20 nz stocks that I follow, kpg was one of two to be up... property stock ryman down 3.8 percent. We're holding kpg not rym

[LaserEyeKiwi]

KPG were $1.63 in mid 2007 (29/6/2007) so I find your statement hard to believe.

I would be interested to discover why almost every source I look at only has share prices records going back to 2008/2009 (including KPG website). I can’t find any specific corporate action then (that came later in 2014 when it converted from trust into a company). KPG was 95c in 2009 (obviously suffered a massive drop during the GFC, just like GMT did).

I’m not doubting your figure (as I can see it on google finance on its “MAX’ chart length, but can’t dig into the detail) - what site did you use?

For anyone who held 1 share in 2008 worth $1.63, it would today be worth $2.59c in shares if all dividends were reinvested. Now based on using that $1.63 figure I would suspect that GMT had a better return if one also reinvested returns (don’t know for sure haven’t got the figures but reasonable to assume). However not sure that means its the better investment today going forward given the big discount to assets and superior dividends and earnings from operations from KPG. In the end it comes down to how one thinks the massive projects KPG are now embarking on will succeed or not.

Personally I think the divestment of some retail (KPG said today on the earnings call that at least one of the centers will sell this financial year and talked about the Northlands sale just being held up by some minor settlement details delayed by covid), and the big surge into Build to rent, additional new office towers, and the fast tracking of Drury (now at ministerial sign off level - also mentioned on call that work can proceed pretty much the next day after that is signed off), is creating an excellent diversified property company.

So GMT took more than a decade to regain its 2007 share price - with the stock basically spending 10 years in a flat dead zone with no growth - what happened there that led to the big surge in share price? Was it a change in management?

[LaserEyeKiwi]

...and back to KPG, from a few posts back some figues on "build to rent":

"...The $221 million, 295 apartment complex ...target stabilised net yield of approximately 4.5% and 10 year property internal rate of return of over 8.0%."

My mathematomator suggests that costs around $1m per apartment if you include a bit for land. Which suggests a sales price of well over $1m, say 1.2m (for 20% margin) and thus rent of $54k pa AFTER various landlord costs (60k or 1200pw gross?). You could play with rent increase and valuation variables to get 8% IRR but for an apartment above a shopping mall in the middle of a rather dreadful industrial part of Auckland, that seems a big ask even in these crazy housing times.

KPG already own the land (Sylvia Park, LynnMall, Drury Town Center, The Base, plus any of the office assets they may wish to repurpose in future). They have plans for 1200 apartments on existing Sylvia park land alone. As well as additional office towers as well. There is a HUGE amount of land that is car parks they can use.

Have you seen the concept images - they look pretty good, and most young people indeed will love to have a wide assortment of retail & dining options on their door step. My wife and I are no longer “young” - but we have already decided that if we have to move to Auckland for whatever reason (work most likely) we would love to live in one of these.

[Beagle]

I would be interested to discover why almost every source I look at only has share prices records going back to 2008/2009 (including KPG website). I can’t find any specific corporate action then (that came later in 2014 when it converted from trust into a company). KPG was 95c in 2009 (obviously suffered a massive drop during the GFC, just like GMT did).

I’m not doubting your figure (as I can see it on google finance on its “MAX’ chart length, but can’t dig into the detail) - what site did you use? In the start menu on my computer there's a site called "Money" I presume its a MS Money site but is usually good for historical share prices. I say usually because when I enter all for KPG it goes right back into the 1990's which is how I did my analysis on how badly its performed since then. Unfortunately for reasons unknown there is no All time period for GMT so I can only see back 5 years on that.

For anyone who held 1 share in 2008 worth $1.63, it would today be worth $2.59c in shares if all dividends were reinvested. Now based on using that $1.63 figure I would suspect that GMT had a better return if one also reinvested returns (don’t know for sure haven’t got the figures but reasonable to assume). However not sure that means its the better investment today going forward given the big discount to assets and superior dividends and earnings from operations from KPG. In the end it comes down to how one thinks the massive projects KPG are now embarking on will succeed or not. Agree with you on that point. My note of caution is that management have been spectacularly unsuccessful so far. I put a lot of stock in historical performance.

Personally I think the divestment of some retail (KPG said today on the earnings call that at least one of the centers will sell this financial year and talked about the Northlands sale just being held up by some minor settlement details delayed by covid), and the big surge into Build to rent, additional new office towers, and the fast tracking of Drury (now at ministerial sign off level - also mentioned on call that work can proceed pretty much the next day after that is signed off), is creating an excellent diversified property company. I think they said they were going to the Environment court ? I've seen a client go there and spend 7 figures and walk away empty handed

So GMT took more than a decade to regain its 2007 share price - with the stock basically spending 10 years in a flat dead zone with no growth - what happened there that led to the big surge in share price? Was it a change in management?Hard for me to comment without having access to chart data going back that far for them.
What I can say is I think Covid has really supercharged the already strongly growing trend towards online shopping and consequent demand for industrial space for fulfillment centers. The yields on the build to rent are nothing special and based on projections that they're not disclosing. Mark my words. Just wait for the unbudgeted repairs and maintenance and widespread meth contamination problems from tenants. They might make something of Drury, time will tell.

Each to their own mate. I think we've debated this to its logical conclusion for now.

[Habits]

Back in the 2000s a friend of mine owned a supermarket which had a huge carpark attached to it. I told him about an aussie report where companies were making bucks from setting up petrol stations. He took that idea to their BOD and what do you know, two years later they started doing the same. I am not suggesting kpg set up a gas station but the idea ofmaking better use of under utilised, high amenity land.

[winner69]

KPG NTA up 4.4% ….I see ARG managed.a 7.2% increase in NTA …hmmmm

Probably doesn't mean much but interesting

[Rawz]

KPG NTA up 4.4% ….I see ARG managed.a 7.2% increase in NTA …hmmmm

Probably doesn't mean much but interesting

Just further evidence of poor nta growth vs kpg's peers. Im sure there are many reasons for it but its still locked into the history books as poor growth.

[Entrep]

From Craigs:

Retained the Overweight rating on KPG post the interim result with a slightly reduced price target at NZ$1.26 reflecting the impact of recent rental abatements and a lift in the risk free rate to 2.9% (previously 2.5%). Despite the cost of Covid rental abatements (c$15m estimated for FY22e), management retained the FY22e cash dividend guidance of no less than 5.3cps. The stock remains the cheapest in the property sector last trading at 4.7% cash yield (sector 3.8%) and 81% P/NTA (sector average 96%). While the short term earnings growth will be hindered by a portfolio mix recycling away from higher yielding assets it is a still positive move for the longer term. In addition quality retail is still performing well outside of lockdown and we feel that KPG’s high quality retail portfolio is being undervalued by the market. Overweight rating retained with KPG last at NZ$1.15 (+1%)…

[dibble]

KPG already own the land (Sylvia Park, LynnMall, Drury Town Center, The Base, plus any of the office assets they may wish to repurpose in future).

True but i presume they have to account for land somehow from an accounting angle (even if leased from itself?), so its probably fair to say the total ave cost of that tranche of apts might be about $1m which feels alarmingly high for a professional big scale outfit huge. (unless you're suggesting it is $221m for 1200 apts?).

Yes, the pix I saw were better than expected but if rent is above e.g. 1200pw that's a rather different target market than I expected for the area but each to their own. I imagine they've done the research. But if you find yourself moving to Akl might i politely suggest you at least compare living above a shopping centre to living by the beach nearer town, probably cost the same.

[Teatree]

Median Auckland rent is $600 have to be pretty special to command that sort of price