Australand looks for increased lot settlements in 2014 on top of 2013 profit gain

Australand Property Group build profit gains

Underlying profit up 4.1%, strong investor appetite for prime assets.

Darryl Daté-Shappard

I started investing after finding a copy of Peter Lynch's "Beating the Street" in the English book section of a library in Japan, where I was living at the time in 1997. Seeing that regular people can find investment ideas just as easily as professionals, I used the philosophy of that book to invest in stocks in Japan, and later in Australia after moving in 2001. I also have experience in property investing, and went on to complete my masters degree in Applied Finance at QUT in Brisbane. I follow the investment style of Peter Lynch, Phillip Fisher and Warren Buffett-- knowing what you invest in, doing your homework to keep up with a stock's story and holding a healthy skepticism of what the stock market calls "value".

Published February 19, 2014 1:19 pm AEDT

Commercial, industrial and residential property developer and investor Australand Property Group (ASX: ALZ) announced a 2013 full-year underlying net profit of $148 million, gaining 4.1% from 2012's $142 million. It saw the biggest percentage increase in its commercial and industrial segment, up 25% to $30 million in operating EBIT.

Investment property, the segment that generated the largest operating EBIT, was up 8.9% to $194 million. Residential property fell by $3 million to $90 million.

Operating EPS gained one cent, rising from 24.6 cents per share to 25.6 cps. Distributions per share remained the same, 21.5 cps, as in FY2012.

Property trends

For commercial and industrial property, tenant renewals continued solidly, and supply remained constrained, so prime grade vacancy rates remained relatively low. Land sales were still challenging and according to the company strong investor appetite remains for prime assets.

Residential property experienced a 25% increase in sales activity overall, with NSW pre-sales activity rather strong. Victoria and Queensland were improving, and WA was solid even though the mining sector was soft and vacancy rates increased. There are 1,823 gross contracts on hand, of which 72% of them are to settle in FY2014.

Outlook

The company's outlook for FY2014 is for continued earnings growth with a strong amount of residential contracts expected to settle in that period. Also, it is expecting its investment property portfolio to increase earnings through fixed increases in rental income.

It projects that earnings will be skewed towards the second half of FY2014, and distribution guidance is for 22 cents per share.

Statutory net profit

Including a gain in investment property valuations of $44 million and write-downs for development and joint venture assets of $65 million, abnormal charges brought statutory NPAT to $135 million, down from $180 million in 2012.

Foolish takeaway

The activity in residential property takes some time to work its way through to realised earnings. However, the trend of increasing demand and contracts is definitely there. You should also be following building materials companies because this trend will have natural flow on effects through to them.

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