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Mirvac Group reports 13.4% half year earnings gain: Is it time to buy?

Commercial and residential property developer and manager Mirvac Group (ASX: MGR) announced a reported interim earnings gain of 12.5% to 7.6 cents per stapled security. Commercial property delivered a solid performance and residential housing continued to grow in this current low interest rate environment.

Mirvac’s business is weighted towards NSW, the state with the largest and strongest performing economy in Australia, but it also operates in Victoria, Queensland and WA. Mirvac’s retail assets are predominantly in metropolitan locations, particularly in Sydney.

In the first half, the company achieved 1,251 residential lot settlements. Mirvac is on track to deliver the full year settlement forecast of more than 2,200 lots. The housing market is still growing, spurred on by the RBA’s recent rate cut. Mirvac estimates potentially it can produce over 10,000 lots over the next four years, based on its current pipeline.

NSW and Queensland showed the biggest increases in lot sales. In its results presentation, Mirvac highlighted the growth in finance for owner occupiers between established dwellings and new dwellings. The trend for new dwellings finance has steadily risen since 2011. Yet finance for established dwellings peaked around 2013 and is slightly declining. This illustrates how the growing housing market is skewed towards new properties in which property developers like Mirvac, Stockland Corporation Ltd (ASX: SGP) and Lend Lease Group (ASX: LLC) stand to gain over the mid-term.

finance for owner occupier chart

Source: Mirvac First half FY 2015 results presentation

Here are the half year results highlights:

–  Sales  reported total revenue of $1.18 billion, up 16.6%

–  Operating earnings before interest and tax (EBIT)  $308.9 million

–  Reported  net profit after tax (NPAT)  up 13.3% to $279 million

–  Earnings per share  reported 7.6 cents per stapled security, operating EPS was 6.3 cpss

–  Dividends per share  4.5 cents per stapled security, up 2.2%

Outlook

Mirvac guidance for financial year 2015 is an operating EPS around 12.2 – 12.3 cents per stapled security. This was narrowed up from the financial year 2014 annual report guidance of 12 – 12.3 cpss, showing second half expectations have risen.

Mirvac stock yields 4.4% unfranked and trades at 17.5 times forward earnings. The share price is at multi-year highs, yet with a steady pipeline of residential property development and a firm commercial property outlook, I think it could be a satisfactory dividend stock.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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