If they make 11.0 cps their CAGR in underlying eps is 7% in the last 5 years in an absolutely booming real estate market. People can decide for themselves if they are impressed with that.
Printable View
If they make 11.0 cps their CAGR in underlying eps is 7% in the last 5 years in an absolutely booming real estate market. People can decide for themselves if they are impressed with that.
My point is that ARV enjoyed about 7% compound average growth rates in a highly supportive real estate market. You can drill down into the nuances of varying level's of tailwinds over that five year period if you want but my comment is based upon a general overview of that timeframe.
When considering what's the right PE one needs to drill down into jhow much of that earnings growth was helped by the market tailwinds (that appear unlikely to recur in the near future) and how much of it was generated by their business model with its pretty modest development margins. Then one needs to consider the metrics in light of the sector leader who have a CAGR in underlying earnings of 33% per annum over the last decade. My thesis is that ARV and SUM should trade on very different metrics because one business model obviously works far better than the other.
Initially I thought the lift in build rate to 300 units in FY23 was a good thing, now I see it as a real challenge with their pretty mediocre track record of development margins and the massively increased constructions costs and supply chain challenges.
At current pricing I prefer OCA to this, at least with OCA its priced like the pretty ordinary company it is. I don't think this deserves a premium to NTA and neither does RYM. The only one that does based on proven high performance is SUM.
Whatever ARV 5 year EPS growth is it is at least positive ..... unlike Oceania with its negative eps growth ....but then Oceania is a 'pretty ordinary company'
I wish it was as simple as comparing underlying eps between retirement companies. With the way OCA account for gains, (outside of underlying profit) on the PPE (property plant and equipment), which if I recall correctly includes their care suites its anything but simple.
OCA accounts are an absolute dog's breakfast. I think ARV, OCA and RYM are all pretty ordinary companies.
As we all know - it just depends on your terms of reference to determine whether a trend goes up or down.
So - you wanted it to be negative. Which terms did you choose to achieve that?
Hint: Quite hard to achieve, if you take the 2022 forecast (16 cents) as reference point, but sure e.g. earnings growth from 2019 (8 cents) to 2020 (- 2 cents) was negative. And yes - 2016 (a stellar 15 cents) to 2021 (12 cents based on a 10 month FY) would be negative as well.
Bad company, really bad company. They made a loss in 2020. Oops - this was Covid, wasn't it?
Anyway - average EPS (9 years) is 7 cents. 2022 forecast is 16 cents. I call this rising, but what do I know ...
For Bars updated forecast this morning. Let the whining from you momentum/ traders begin.
OUTPERFORM
We walk away from Arvida's (ARV) 2H22 investor update with three key takeaways; (1) Arena Living is so far performing inline with expectations, which we view as a clear positive. On our estimates Arena Living will contribute with about one third
of annuity EBITDA in FY23; (2) organic resale gains appears to be growing strongly, likely driven by maturing Sanderson
villages; and (3) operating expenses are elevated due to the Omicron outbreak. ARV estimates NZ$4–5m of additional
costs in 2H22. This is broadly in-line with our estimates but we did not receive any information in relation to non-Omicron
opex, something that remains a headwind for the sector. We leave our NZ$2.50 target price unchanged as increased WACC
is offset by higher earnings and roll forward.
What's changed?
Resale gains — the good news story that delivers
Resale gains is the good news story in the sector. We estimate that the all important resale margins came in at ~28% in 2H22, up from
a run-rate of 20–25% over the last few periods. The strength will be driven by the very high resale margins from Arena Living, which
we estimate to be >40%. Arena Living was only included for three quarters of 2H22, suggesting strong support for our FY23
expectations of 28% resale margins. Pleasingly, average resale unit prices increased +18% versus FY21, also likely helped by Arena
Living related resales. We have increased confidence in our raised FY23 resale gains estimate of ~NZ$70m, +62% versus FY22 (+23%
organically) and have increased our FY22 resale gains estimates by +NZ$9m to reflect the announced 2H22 numbers.
Operating expenses — the bad news story but appears in-line with expectations
Operating expenses is the bad news story in the sector. Here we didn’t get much news, as ARV doesn't report operating expenses
within its sales release. ARV commented that it had ~NZ$4m–5m of additional COVID related costs in 2H22. We are looking for
underlying opex growth of 12% in FY22 versus FY21 in addition to Arena Living and the announced Omicron additional expenses. We
have increased our FY22 opex estimates by less than +1% and left our FY23/24 opex estimates unchanged.
ARV — one of the best risk rewards in an uninspiring NZ market
We view ARV as one of the most attractive risk rewards in an overall uninspiring NZ market. We expect strong organic and in-organic
growth in FY23, up ~+50% versus FY22, and continued double digit growth thereafter as its villages mature and repricing of the
Arena Living makes its way through to increased Deferred Management Fees (DMF). ARV is valued at ~1x book value, ~13x PE and
~18x EV/annuity EBITDA. This is an approximate 30–50% discount to Ryman (RYM) and Summerset (SUM) on a blended basis
BP, I was using Underlying Earnings PE ....my bad for not making that clear
In case people overlook it - this bit from Forbar is brilliant
We view ARV as one of the most attractive risk rewards in an overall uninspiring NZ market. We expect strong organic and in-organic
growth in FY23, up ~+50% versus FY22, and continued double digit growth thereafter
and its really undervalued by the market - 18x EV/annuity EBITDA. This is an approximate 30–50% discount to Ryman (RYM) and Summerset (SUM) on a blended basis
That's all you need to know