Only a complete fool prints predictions for the year ahead. So here are a few of my own. Low interest rates will continue to support the Australian love affair with property and companies with a high level of after tax income yield will continue to find generous support. Companies with exposure to these themes and a large proportion of revenues coming from outside Australia will perform best in the year ahead.
One company offering exposure to these themes is property developer and investor Mirvac Group (ASX: MGR). The group owns a diverse portfolio of retail, commercial and residential properties across Australia and should benefit from the upswing in the residential property market.
It's expected to deliver strong earnings growth this year and reaffirmed earnings guidance of 11.7 – 12.2 cents per share for FY14, which means it trades on a forward price-to-earnings ratio of approximately 14. That's reasonable considering the group has an overweight position in property developments in the booming markets of NSW and Victoria. In fact nearly three-quarters of developments are in these states.
Robust population growth nationwide should continue to support long-term demand and the group's other business interests, such as office rental space, look set to rise up from last year's trough in cyclical demand. This business looks set fair and with a forecast full-year dividend payout between 8.8 and 9 cents per share, it's on an attractive forward yield of 5.2%.
Companies with significant overseas operations and exposure to global property and infrastructure development will perform well. Macquarie Group (ASX: MQG) also has leverage to strengthening US and European markets perhaps set to move further ahead of recent five-year highs. Based on FY14 forecast earnings the group is trading on a forward price-to-earnings ratio of approximately 18 . The forward dividend yield is also in the region of 4.5% at today's share price of nearly $55. With several tailwinds supporting it, this former high-flyer may yet innovate its way back to the top in 2014.
Crown Resorts (ASX: CWN) also seems to have several tailwinds supporting its future growth prospects. It probably needs no introduction to most Australians and an equity interest in the business may be a better bet than one at its glitzy casinos. The business has big plans to capitalise on the fast-growing spending power of the Asian middle-class. The company is developing luxury resorts and casinos across much of the mega-populous Asian landmass and appears at the front of the queue to capitalise on the Asian Luxeplosion.
Closer to home the highly-ambitious boss James Packer has struck an agreement with the New South Wales government to develop Sydney's Barangaroo district into a 'Syd Vegas' style luxury property and entertainment complex. The bill for the urban transformation of the area is expected to reach $6 billion. This is good news for construction company Lend Lease (ASX: LLC), which is contracted to complete much of the work.
Foolish takeaway
I'm happy to predict shares in these highly profitable companies will be more valuable than paper money in 2014. The market's positive reaction to the tapering of the US Federal Reserve's quantitative easing program suggests the long farewell to loose money may make 2014 another bumper year for equity investors in general.
