What
Shares in property development and construction company Devine Limited (ASX: DVN) jumped 19% on Wednesday after announcing that net profit for the full year to 31 December would be between $12 million and $14 million.
So What?
Before the update, investors were expecting the company to deliver between $7 million and $10 million in profit. This corresponds to an increase of up to 100% and earnings per share will now be between 7.9 and 8.8 cents per share.
Devine reported a massive $72 million loss in the six months to 31 December 2013, corresponding to a loss per share of 46 cents. The new profit guidance places the company on track for its best year in a long time and indicates a price to earnings ratio of between 8.9 and 10 based on a share price of 79 cents.
What now?
Devine is now trading nearly 30% above its 12-month low, but is still well below its 52 week high of $1.39 reached in October 2013. In late October 2013 the company announced a $70 million impairment that took the company to the massive loss for the last six months of 2013.
Some shareholders have been disappointed that the company hasn't been able to take full advantage of the recent boom in house prices, however Devine's main areas of operation; Queensland, Victoria and South Australia, have been relatively subdued compared to the New South Wales market.
Indications are that the Queensland market is starting to see some good growth, and the announcement indicates that Devine is having a lot of success selling its properties. "At the end of April the Company had secured 60 per cent of its annual forecast land settlement target and 70 per cent of its annual home construction starts. Apartment sales have also been very strong, with 80 per cent of its full year settlements target also secured"
This is a positive sign that conditions are improving and that the company could well outperform even its own expectations for the rest of the year.
