Mirvac Group (ASX: MGR) released its 2019 half year (HY) report this morning detailing results to 31st December 2018.

Mirvac Group

Mirvac is a leading Australian property group with approximately $21 billion of assets under management. Operations include both commercial and residential projects, primarily based in Sydney and Melbourne, but also include Brisbane and Perth developments. Mirvac now has 47 years of experience since their establishment in 1972.

Here Are the Five Key Points

  • Profit attributable to investors increased 39% to $648 million
  • Operating profit after tax increased to $290 million, up 26%
  • Operating cash inflow of $167 million, compared to an outflow of $20 million in 1H18
  • Net tangible assets per stapled security was up 6% to $2.44
  • HY distribution of $193 million; equal to 5.3 cents per stapled security

Analyst Targets

According to Bloomberg, estimates for Mirvac distributions were 5 cents per security. The actual result was marginally higher, with Mirvac reporting 5.3 cents.

Management Commentary

Mirvac CEO and Managing Director, Susan Lloyd-Hurwitz, credited Mirvac’s investment portfolio for the profit increase, stating, “We have delivered a strong half year performance with a 26 per cent increase in our operating profit to $290 million, driven primarily by our high-performing investment portfolio”.

Despite a slump in Melbourne and Sydney house prices, Ms Lloyd-Hurwitz maintained a positive outlook for Mirvac’s residential products.

She wrote, “Despite the challenging residential market, we believe our high-quality residential product, located close to amenity and transport, will continue to outperform the wider market.”

Outlook

Mirvac refined guidance for FY19, estimating earnings per share (EPS) of between 16.9 cents and 17.1 cents per stapled security. This would represent growth of 3-4%. They also confirmed guidance for distributions of 11.6 cents, or growth of 5%. Mirvac believes they are on track to meet their target of 2,500 residential lot settlements in FY19.

Looking further to the future, Ms Lloyd-Hurwitz expects ongoing growth from developments, stating, “our committed $3 billion development pipeline provides significant earnings potential. We expect to deliver more than $95 million of additional annual NOI, $200 million of development profit and $200 million of fair value uplift by FY23”.

Mirvac continues to make the most of their developments, with occupancy rates of 100% for the industrial portfolio and 99.3% for the retail portfolio.

My Take

Mirvac has released impressive growth figures for operating profit and cash flow. However, they are operating in a tough market with Sydney and Melbourne property prices looking stagnant. It should also be noted that they are projecting only very modest growth for FY19 of 3-4% for EPS. Investors will likely react favourably today to the large increases in profit, but it remains to be seen if they can continue this growth rate.

If you’re considering investing in Mirvac, also check out Charter Hall Group (ASX: CHC). They have delivered impressive performance over the last 12 months and the share price has reflected that.

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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).