Banks sorted for a few more years
Interesting debt increased by $130m to $775m over last six months …no worries
http://nzx-prod-s7fsd7f98s.s3-websit...740/406096.pdf
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Banks sorted for a few more years
Interesting debt increased by $130m to $775m over last six months …no worries
http://nzx-prod-s7fsd7f98s.s3-websit...740/406096.pdf
For Bar out this morning. Make your own mind up
NEUTRAL
Arvida Group (ARV) provided an update on drawn debt, implying meaningfully higher debt versus our and Visible Alpha consensus forecasts. The higher than expected debt is likely predominantly driven by higher development capex, but also worse than expected cash collection from new sales and resales. ARV also announced it has restructured its debt facilities: now split between NZ$450m of development facilities, excluded from Interest Coverage Ratio (ICR) covenants, and core facilities. This greatly improves ARV's ICR coverage. We view the aged care sector as attractive in the context of NZ equities. For a significant re-rating to take place we believe the operators need to demonstrate an ability to limit the increase in net debt and, eventually, to demonstrate an ability to generate positive free cash flow and deliver a decline in net debt. With this update we no longer believe that FY24 will see a slowdown in the build up of net debt for ARV and downgrade it to NEUTRAL with a decreased target price of NZ$1.30 (from NZ$1.55). We continue to view ARV as well positioned for long-term growth and consider the valuation highly undemanding.
What's changed?
Earnings: FY24/FY25/FY26 underlying earnings decreased -3%/-4%/-4% on higher interest, annuity EBITDA broadly unchanged.
Target price: Down to NZ$1.30 (from NZ$1.55) on higher net debt and decreased dividend forecasts.
Rating: Downgraded to NEUTRAL (from OUTPERFORM).
Higher than expected debt likely driven by a continued increase in capex
We increase our net debt estimate by ~+NZ$80m for 1H24 (similar increase for FY24), driven by (1) higher development capex spend. We had previously assumed a decrease in year-on-year development capex for ARV in 1H24, and we now expect it up ~+NZ$25m from 1H23 to ~NZ$130m, the highest half on record for the company; (2) worse than expected cash collection from sales. In ARV's 2Q24 update it had flagged 'extended settlement timeframes are still a factor'. We decreased our cash collections in our previous publication but decrease them further in this update. We also cut our dividend forecasts given a likely increased focus on cash.
RYM and OCA our preferred sector picks — a combination of attractive valuation and falling capex
Our two preferred aged care names are OUTPERFORM rated Oceania Healthcare (OCA) and Ryman Healthcare (RYM). We expect both to see a more modest increase in net debt in FY24, with OCA largely flat and RYM up single digits; while for ARV and Summerset (SUM) we now forecast debt up >+25%. RYM is valued at a substantial discount relative to SUM and OCA, in-line with ARV after historically trading at a premium on our preferred metric of EV/annuity EBITDA. ARV is on a substantial discount to book value but we expect faster growth with OCA (it has a large discount to book value). While RYM, OCA and ARV all remain below book value, any re-rate back to book will require evidence of improving free cash flow which we see more likely with RYM and OCA.
25c TP downgrade by Forbar.
That is a big decrease.
Some big volume going through today
ACC Topping up...
For this disclosure,—
(a) Total number held in class: 45,079,435
(b) Total in class: 727,975,669
(c) Total percentage held in class: 6.192%
For last disclosure,—
(a) Total number held in class: 36,340,817
(b) Total in class: 723,577,532
(c) Total percentage held in class: 5.022%
ACC not buying today …share price down
Not a real surprise ARV share price down to $1.06