IT’S not the market overall, it’s the particular company that you pick; that seems to be the message for investors looking to invest in listed property companies.
The latest round of profit reports also shows that the most recent headline number is a very poor guide to future prospects.
Inner-city apartment developer Finbar, for instance, reported an interim loss but anticipates a record full-year profit.
Similarly, Cedar Woods reported a sharp slump in interim profit but also anticipates a record profit for the full year.
The strongest interim profit report was from property investment and funds management company Aspen Group, which described its increased profit as a “sound start” to the year. Aspen also reaffirmed its full-year profit guidance.
As expected, the laggard among major Perth-based property groups was land developer Peet, which reported a sharp slump in interim profit.
Peet braced shareholders for a weak annual result when it released a trading update last November.
It highlighted the slide in consumer confidence as the major issue holding back the residential market, and said last week that continued to be the case.
“While sales volumes have improved since the interest rate cuts in late 2011, it is too early to determine whether the increases might be the start of a more positive trend,” the company said.
Aspen managing director Gavin Hawkins said the key to his group’s higher profit was the weighting of its portfolio towards Western Australia, the recurring income streams from its property and funds management divisions, and an expanded distribution network.
The positives included a 10.3 per cent revaluation of the Septimus Roe office building in central Perth and an 18 per cent revaluation of its Karratha Village workers camp.
Conversely, Aspen wrote down the value of its investment in Aspen Development Fund No 1, “in line with the difficult market conditions for new major developments”.
The interim results reported by Finbar and Cedar Woods were affected by the timing of property settlements. Both companies said their diversified portfolios, which include multiple projects at an advanced stage of development, stood them in good stead.
Cedar Woods managing director Paul Sadleir said the company was satisfied with the first half result.
“We are confident of delivering a record net profit of $34 million for the full year, comfortably exceeding our 10 per cent per annum earnings growth target,” he said.
Finbar’s confidence in its prospects was demonstrated by a 16 per cent increase in interim dividend.
Looking ahead, Aspen’s Mr Hawkins said trading in residential land and development syndicates remained mixed in the face of domestic and global uncertainty.
He also referred to a challenging environment for realisation of major commercial and residential developments, coupled with capital constraints that hamper new developments.
But Mr Hawkins concluded that the group’s property portfolio was well positioned, with strong tenant demand expected to lead to further rental growth and enhanced portfolio metrics.
Aspen affirmed its 2012 guidance for operating earnings before tax of $35.75 million.
Peet said it expected conditions to remain challenging throughout 2H 2012 as a result of continued pressure on the broader Australian economy (and) tightening credit markets.
It added that consumer confidence, which it described as the key to improved trading in the residential market, remains fragile.
“Nonetheless, Peet remains confident in the medium to long-term fundamentals of the Australian property market,” the company stated.
“There is an increasingly significant structural imbalance between housing supply and demand across Australia – historically low construction activity and finance approvals with a tightening rental market.”
It provided some encouragement to its shareholders by predicting that its operating earnings for the full year will be at the upper end of its guidance of $15 million to $20 million.
