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Avjennings Ltd reports: what you need to know

The share price of residential property developer Avjennings Ltd (ASX: AVJ) jumped 7.3% by mid-morning on Monday after the group released an impressive set of interim results, although it has now retreated to be flat at 55 cents.

Here are some highlights from the half year report:

  • Revenue soared 58% to $187 million
  • Profit before tax leapt 42% to $24 million
  • Earnings per share jumped 39% to 4.3 cents per share (cps)
  • A 1.5 cps fully franked dividend was declared with represents an increase of 50% on the interim result paid for financial year 2015
  • Gearing remained reasonable at 23%

Outlook

Avjennings has increased its land holdings to 10,436 lots which provides plenty of scope for further growth. Commenting on the outlook management noted that it has no exposure to high-rise apartments and minimal reliance upon foreign buyers – two areas that are believed to be facing headwinds.

Avjennings sees the market for traditional housing as still positive with tailwinds from low interest rates, shortages of affordable detached housing in major capital cities along the east coast and positive population growth.

The Managing Director Mr Summers noted that: “The directors and management expect a typically stronger second half in fiscal 2016 and reiterate the Company’s contract signings guidance for the current financial year of 1,00 to 2,100 lots. Our markets are undersupplied so demand should remain strong for some time.”

According to data supplied by Thomson Consensus Estimates, Avjennings is forecast to achieve EPS of 9.1 cps for the full year. At today’s share price, this implies the stock is only trading on a price-to-earnings ratio of 6.5 times – which appears cheap.

The performance of Avjennings could suggest other property developers including Lend Lease Group (ASX: LLC) and Stockland Corporation Ltd (ASX: SGP) may also report solid results which could mean there is some upside available to investors in the sector.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.