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Is the Mirvac share price in the buy zone?

The Mirvac Group (ASX: MGR) share price has climbed 38.18% in 2019 thanks largely to strong earnings and a property market rebound.

However, is it the best Australian real estate investment trust (REIT) on the market right now?

Why 2019 has been good for Mirvac

One tailwind for the Mirvac share price has been the Reserve Bank of Australia (RBA) interest cuts in 2019.

The RBA has slashed rates by 75 basis points (bps) to 0.75% and is tipped to cut them even further before year-end.

Cheap credit has induced borrowers to increase their lending and spend more on the already-hot Aussie property market.

For a residential developer like Mirvac, I’d expect these rates cuts to flow through to earnings in February next year.

The Mirvac share price climbed higher after its latest result delivered a fourth-consecutive $1 billion net profit.

Operating profit climbed 4% year-on-year (YoY) to $631 million with a return on capital invested (ROIC) of 10.1% for the year.

The rebounding property market helped boost Mirvac’s investment portfolio to $516 million with further growth prospects.

Are Mirvac shares good value?

Mirvac shares are currently trading at $3.14 per share having climbed 42.73% since the start of January.

Mirvac’s 3.69% per annum distribution yield is quite competitive even amongst the high-yielding REIT sector.

For context, Scentre Group (ASX: SCG) is netting 4.91% per annum and Charter Hall Long WALE REIT (ASX: CLW) a tidy 4.71%. However, I think Mirvac’s strong full-year result and potential residential growth is worth the lower yield.

The Mirvac share price has also climbed higher than Scentre Group or Charter Hall Long WALE REIT in 2019.

There are a number of compelling A-REIT buys at the moment, but I think Mirvac shares appear to be good value.

Foolish takeaway

The Mirvac share price has bucked the trend of REITs failing to deliver strong capital growth in recent years.

With the RBA set to lower rates further, Mirvac’s significant residential property exposure could be a great buy in 2020.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Scentre Group. 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 Scott Phillips.

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