The team at Bell Potter has initiated coverage on ASX real estate stock Gemlife Communities Group (ASX: GLF).
The company is a vertically integrated operator of land lease communities for residents over 50 years old. Revenue comes from developing and selling manufactured homes and collecting rent on the underlying land.
The Australian retirement resort operator debuted on the ASX back in July with an IPO of $4.16 per share.
Since then, it has lifted more than 15% and closed Thursday's trading at $4.82.
Bell Potter released a report yesterday, placing a buy recommendation on this ASX real estate stock.
Let's examine what was behind the attractive valuation.
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Bell Potter believes in this premium business
The broker believes the business is well placed to capture a share of Australia's aging population in the living sector.
Bell Potter said it is unique amongst peers with an internal construction team, enabling sector leading development margins and the ability to dynamically meet demand (upwards or downwards), and manage risk via increased visibility and capital management (i.e. developing multiple stages concurrently, or switching off).
The broker also reinforced confidence in its experienced management team.
The Puljich family are well regarded industry operators, with significant skin in the game (mgmt. c.43% of SOI incl. Thakral family) and alignment to drive shareholder value over the long term.
Forecasting ahead, Bell Potter has an optimistic view on earnings.
It forecasts a +15% 3yr EPS CAGR for GLF, driven by increased development (BPe 16 active communities in CY27 vs 10 today) and settlement ramp up (BPe +16% 3yr CAGR to 451 settlements CY27), with sector leading gross build margins (c.50%). 1yr forward PE of 17.4x drops to 14.7x CY27 as development completions build out passive earnings contribution.
Attractive valuation
Bell Potter has placed a buy recommendation on this ASX real estate stock and a price target of $5.55.
This indicates an upside of 15.15% from yesterday's closing price of $4.82.
The broker said Gemlife Communities Group is a high-quality and well-managed business that is at an attractive entry point as it transitions from a 'restocking' phase into one of strong growth.
Bell Potter reinforced the business is already tracking ahead of PDS expectations, and we see the CY25 result as the next major catalyst.
