Mirvac Group (ASX: MGR) is the latest property developer/REIT to reveal its quarterly progress to the market, following on from GPT Group (ASX: GPT) yesterday and Stockland Corporation Ltd (ASX: SGP) the day before.
The results were in line with forecasts, with key highlights including:
- Reaffirmed earnings guidance of 12-12.3 cents per share this year (up 0.8-3.4% on pcp)
- Distribution guidance of 9.2-9.4 cents per share (around 5.3% unfranked at today’s prices)
- Acquired retail/marina asset Birkenhead Point in Sydney
- 76% of expected FY15 development EBIT already secured
- Occupancy remains high with offices at 95.9%, Retail at 99.2% and Industrial at 99.5%
It’s not a bad result, particularly the high levels of EBIT already secured and the exceptionally high occupancy rates, it’s just that Mirvac happens to be lagging its competitors, with Stockland forecasting profit growth of 6-7% this year, and even the slower GPT Group predicting at least 4%.
Mirvac’s 0.8-3.4% increase comes on the back of growth of 14% last year, but Stockland delivered 12% and GPT delivered 8.5%.
When you factor in Stockland’s higher dividend of 5.8% it is the clear winner of the three, and other developers like Abacus Property Group (ASX: ABP) – which sold Birkenhead Point to Mirvac – pay over 6% with better growth prospects.
Picking a reliable earner can be a real challenge, particularly in the property development sector where earnings can be lumpy thanks to timing of sales and market dynamics.
When you factor in the need to beat inflation (2.3% in the most recent quarter), steady earnings growth of 3-4% from a REIT barely cuts it, high dividends notwithstanding.
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Motley Fool contributor Sean O'Neill doesn't own shares in any company mentioned.
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