Revaluations Underpin Mirvac Profit
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A subdued reception from the market to yesterday’s 2017-18 annual results from property group Mirvac which revealed its third billion dollar result in as many years - thanks to some nice revaluations.
Those strong net property revaluation uplifts across the investment portfolio produced a $490 million gain on top of the company’s benefits of being overweight property assets in Sydney and Melbourne.
In June, Mirvac tightened its earnings guidance for the 2018 financial year to 15.6 cents per stapled security, or growth of 8% on 2016-17. This is at the top end of its previous guidance of 15.3 cents to 15.6 cents per security.
This follows the continued delivery of earnings in the Group’s residential division since it released its third quarter operational update on 23 April 2018.
Total dividend for 2018 is 12.5 cents per share, up 13.6%, payable on August 31.
Despite all that the company’s securities eased 0.4% to $2.35. perhaps its concerns about the health of the Sydney and Melbourne property markets.
CEO Susan Lloyd-Hurwitz said, “As we have expected, market conditions in the residential sector have normalised. Our reputation for quality and for delivering superior products for our customers has ensured we are still a favoured residential brand among owner-occupiers.
“We achieved our target of approximately 3,400 residential lot settlements during the financial year, and delivered a return on invested capital of 18.1 per cent. Our gross margins of over 25 per cent reflect our strategy to focus on the strong Sydney and Melbourne markets, as well as our ability to buy and sell at the right time in the property cycle.”
The company is moving into the build to rent sector with the launch of a $1 billion venture with the Clean Energy Finance Corporation (CEFC) committing to a 30% stake as a cornerstone investor.
The first asset for the venture, and Mirvac’s first purpose-built build-to-rent asset in Australia, will be Indigo at Mirvac’s project at Sydney Olympic Park in Sydney, Mirvac’s fourth building in the precinct. Mirvac will act as the development, investment and property manager.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.