Investors in Sydney focused real estate agent McGrath Ltd (ASX: MEA) may still be feeling confused today after the company issued its first half 2017 earnings report and presumably expected investors to use analysts' guesses as a benchmark as to how it was tracking in the second half.
On January 23 McGrath issued a market update advising how it was tracking against then (unnamed) analysts' guesses as to its full year results.
The estate agent stating last month: "McGrath has not given guidance for FY17 earnings, but notes equities research in the market which does give full year estimates. McGrath's first half trading results are being finalized, and early indications suggest they are in line with those analyst estimates. However, we believe the second half results will be weaker than the first half, which would make those full year analyst estimates look high".
As far as I can tell these analysts' estimates are not publicly available which would leave anyone other than the "analysts" unsure as to what McGrath is on about.
Luckily, McGrath later took the opportunity to update the market that the analyst in question was Bell Potter and that the full year guidance was for EBITDA of $20.9 million.
Today it updated the market over its results for the six-month period ending December 31 2016. Below is a summary with comparison on a pro forma basis to the prior corresponding period.
- Pro forma revenue $67m, down 11%
- Pro forma EBITDA $9.3m, down 37%
- Pro forma NPAT $2.4m, down 72%
- $5.3m cash in hand and no debt
- Interim dividend of 1 cent per share
Since the January 23 update McGrath's shares have plunged a further 25% and in my opinion the agents would be better off focusing on running the company or providing its own guidance, rather than offering a commentary on how it's tracking against analysts' guesses.
Given that listings across its key Sydney market have remained at abnormally low levels the agency has enough problems of its own including the recent exodus of real estate agents some of whom have gone on to join a rival agency in Sydney's east.
However, McGrath retains a lot of talent within its sales ranks and I think is generally one of the best operators at its core business of property management and selling.
This morning the stock sells for 64 cents and given some of the guidance for H2 2017 is still to "get on the phone to Bell Potter" it's not going to inspire much confidence with investors, even if it does appear cheap on conventional valuation metrics.
