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Equity Bottom-Up

Mirvac is raising AUD 750 million in new equity via an institutional placement and up to another AUD 75 million via a non-underwritten, retail security purchase plan, or SPP. The placement is priced at AUD 2.97 per security and the SPP is priced at AUD 2.90 as SPP securities won’t be issued in time to receive the upcoming AUD 6.3 cent distribution. We believe the stock is overvalued and recommend not subscribing to the SPP, which closes on June 25
With its security price up about 35% in six…

Earnings growth is underpinned by Mirvac Group's higher-quality commercial property portfolio of office and retail assets. Mirvac's key point of differentiation from passive REITs is its development business (mostly residential), which accounts for 20%-30% of operating profit. Margins for development have been boosted in recent years by across-the-board house price appreciation, but we expect prices and margins to moderate in the long term, weighing on margins and hence earnings growth. Still…

We reiterate our AUD 2.40 fair value estimate for no-moat-rated Mirvac Group following transfer of coverage to a new analyst. At current levels, shares screen as overvalued. While the firm owns a relatively good-quality portfolio of commercial property, it is higher risk than most AREIT peers because of its residential development business
Mirvac's business strategy is to generate 80% of profit from passive investments via Mirvac Property Trust and 20% from development activities. Mirvac's…

As part of its third quarter update Mirvac Group reiterated guidance for fiscal 2019 earnings per security, or EPS, of AUD 16.9 to 17.1 cents, up 3% to 4%. This solid growth is underpinned by standout performance of the office portfolio where headline rents (excluding payments for tenant incentives) for newly negotiated leases increased 14.3% on prior rents. Strong outcomes from lease renewals looks set to continue for a further two years, at which point new supply will enter the Sydney market…

<p>Mirvac Group’s reported first-half fiscal 2019 operational earnings of AUD 290 million or AUD 7.85 cents per security were up 27% on the previous corresponding period, or pcp, nearly entirely attributable to an AUD 87 million lift in pretax development earnings. Guided growth in fiscal 2019 earnings per share tightened slightly to 3%-4% growth from 2%-4% previously. The major business activities of office ownership and development are performing better than expected. Office rents have continued…</p>

Australia

Mirvac Group is an integrated, diversified Australian property group comprising an investment portfolio and a development business. The Company's investment portfolio, Mirvac Property Trust, invests in and manages office, retail and industrial assets and the development business has exposure to both residential and commercial projects.

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