Mirvac Group (ASX: MGR) has reported its FY21 half-year result, can the shares build on this?
Mirvac is a diversified property business which owns, leases and constructs various property.
What happened?
The business reported statutory profit of $396 million for the period, down 35%. Operating profit after tax declined by 21.6% to $276 million.
In commercial and mixed-use development, its projects continue to progress. The Locomotive Workshop in Sydney is 86% pre-committed and on track for completion in late FY21.
In ‘office’, the rent collection rate is 97%, with the occupancy rate at 96% and a weighted average lease expiry (WALE) of 6.7 years. It reported like for like net operating income growth of 0.5%, including COVID-19 impacts.
In ‘industrial’, the rent collection rate was 100%, with an occupancy rate of 99.7% and a WALE of 7.3 years.
Turning to retail, the rent collection rate is 84%, though occupancy is 98.4%. It generated net property income of $72 million. Comparable moving annual turnover sales movement was down 8.6%.
Looking at build to rent, it opened its first property – LIV Indigo at Sydney Olympic Park with 48% of leases signed as at 9 February 2021, with pricing per unit consistent with the underwrite.
Finally, with residential, it settled 1,076 residential lots, exchanged over 1,300 lots and released over 1,260 residential lots. There were defaults at 3.5% due to market factors, exacerbated by COVID-19 impacts. Mirvac reported pre-sales of $946 million with 51% attributed to masterplanned community (MPC) projects. Mirvac said it achieved a strong gross development margin of 23%.
Mirvac declared a half year distribution of 4.8 cents per share. Its net tangible assets (NTA) per share increased to $2.58.
FY21 guidance
Mirvac provided FY21 guidance of operating earnings per share (EPS) of between 13.1 cents to 13.5 cents, with distribution guidance of 9.6 cents to 9.8 cents.
That means that Mirvac is valued at under 18 times the operating earnings for this year, with a distribution yield of at least 4.1%.
Summary thoughts
Mirvac is still seeing disruption, but it’s growing in good areas including industrial and build to rent. With the share price below the NTA and a distribution yield of 4%, it could be one to keep an eye on, particularly if the housing market keeps performing strongly. But I’m not a big fan of house-building businesses. They have big balance sheets and it takes a while to collect the cash after a project site is purchased.
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