Affordable accommodation provider Aspen Group Limited (ASX: APZ) reported robust results for FY24, which ended on 30 June 2024.
Aspen group shares are currently down 0.75% at $1.98.
Let's find out how this ASX small-cap company performed in the last financial year.
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Double-digit growth in FY24 revenue and profits
Key highlights from the results include:
- Net rental income increased by 27% to $30.8 million, while development profits surged 39% to $8.7 million
- Underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA) increased by 31% to $32.2 million
- Underlying operating earnings grew 21% to $25.3 million
- Underlying earnings per-security (EPS) increased by 15% to 13.81 cents
- The company declared a distribution of 8.5 cents per security, up 10% on FY23
- Net asset value (NAV) increased by 11% to $2.23 per security
The average selling price of Aspen Group's properties remained competitive at approximately $332,000 while delivering a 30% profit margin for its development projects.
In FY24, the company invested $52 million in acquiring properties across the country and an additional stake in Eureka Group Holdings Ltd (ASX: EGH), which Aspen now owns 36% of. Aspen also divested from 38 sites with relatively high rent for $25 million.
The company focuses on the cheaper end of the property market, which benefits from a structural supply shortage in Australia. Its average rent was just $317 weekly in FY24, even after a 15% jump from the previous year. In addition, Aspen's continuous efforts to improve operational efficiency have led to margin expansion in its rental division, which recorded a 50% operating margin.
Aspen Group aims to enhance growth opportunities through its development projects. The company is engaged in 9 active projects across different sectors and regions. Through its capital-light development model, Aspen achieved a high return on invested capital (ROIC) of 21%.
The company emphasised that it has 1,152 approved sites for future development in its pipeline, approximately 12 times FY24 revenue, indicating a long runway for growth.
The company maintained a strong balance sheet, with its financial gearing of 26% and an interest cover ratio of 3.7x.
FY25 outlook
Management is optimistic for the new financial year, with projected underlying operating EBITDA of $40 million, a 24% increase from FY24, and expected underlying EPS growth of 10% to 15.2 cents.
The company also guided for an 18% increase in its FY25 distribution to 10 cents per security.
The company continues to see high occupancy in its property offerings driven by its competitive rents.
The company also sees volume growth in rental properties driven by its property acquisitions and its 36% holding in Eureka Group.
Based on strong demand, Aspen Group estimates its current market rent for the residential portfolio is $390 per week, which is about 12% higher than FY24.
Aspen Group aims to further enhance its growth potential by recycling capital out of non-competitive and non-core assets into strategic assets.
Trading below its book value
Aspen Group securities are valued at approximately a 10% discount to its latest NAV of $2.23 per security, which appears attractive. For context, Aspen's NAV has increased by double-digit annually over the last five years from $1.13 in FY19.
Aspen Group offers a distribution yield of 5% based on its FY25 guidance.
