New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Arvida Group Limited</h2>
1H20 Preview — Track Record Traction
Arvida Group (ARV) will report its 1H20 result on 19 November and we expect solid underlying EPS growth of +5% with all areas of its business continuing to strengthen. A key driver is expected to be a lift in new sales and resales volumes, while its development progress will be of significant interest given the lift in build activity underway and the new brownfield sites acquired in early FY20. OUTPERFORM.
Key things to look for in the result:
<ul>
<li>Steady EPS growth in a low growth world — Robust underlying profit growth of +16% is forecast given development activity and accretive acquisitions, although EPS will be lower due to the issuance of new shares. We expect that ARV’s track record of consistent operational performance across its retirement and aged care portfolios, successful integration of acquisitions and its improving development capability to again be highlighted in 1H20.</li>
<li>Realised fair value gains from new sales and resales a key driver — We expect ARV to benefit from a lift in sales volumes and unit pricing combined with steady margins, leading to a strong uplift in realised gains.</li>
<li>Stable key metrics — ARV is expected to maintain high occupancy in its aged care operation and to continue to be one of the highest rated in the sector in terms of DHB certification levels across its care facilities with 66% of its aged care facilities having the highest 4 year DHB certification as at June 2019. We also expect resales vacancy to remain under control given robust demand.</li>
<li>Development update as ARV ramps up activity — We expect ARV to be on track for its FY21 build target of 200 units and beds and we forecast 170 units to be delivered in FY20. In FY20 ARV is building across nine brownfield sites and its first greenfield site at Waimea Plains in Richmond.</li>
</ul>
Investor briefing for 19 November<a target="_blank"></a>
Conference call: 10.30am (NZ time) NZ 0800 667 018, AU 1800 148 258. Passcode: 3777398
Figure 1. Summary of 1H20E forecast (NZ$m)
<table class="table table-striped">
<thead>
<tr>
<td style="width: 119.8pt;">
Six months ending 30 September
</td>
<td style="width: 42.8pt;">
1H19
</td>
<td style="width: 42.8pt;">
1H20E
</td>
<td style="width: 42.8pt;">
% chg
</td>
</tr>
</thead>
<tbody>
<tr>
<td style="width: 119.8pt;">
Total revenue
</td>
<td style="width: 42.8pt;">
87.4
</td>
<td style="width: 42.8pt;">
95.7
</td>
<td style="width: 42.8pt;">
9.5%
</td>
</tr>
<tr>
<td style="width: 119.8pt;">
Normalised or underlying profit
</td>
<td style="width: 42.8pt;">
17.9
</td>
<td style="width: 42.8pt;">
20.8
</td>
<td style="width: 42.8pt;">
16.2%
</td>
</tr>
<tr>
<td style="width: 119.8pt;">
Underlying EPS (cps)
</td>
<td style="width: 42.8pt;">
4.3
</td>
<td style="width: 42.8pt;">
4.5
</td>
<td style="width: 42.8pt;">
5.4%
</td>
</tr>
<tr>
<td style="width: 119.8pt;">
DPS (cps)
</td>
<td style="width: 42.8pt;">
2.6
</td>
<td style="width: 42.8pt;">
2.9
</td>
<td style="width: 42.8pt;">
9.6%
</td>
</tr>
</tbody>
</table>
Source: Forsyth Barr analysis, company reports
<div class="content-highlight">
Investment View
ARV has future growth prospects centred on brownfield and greenfield expansion. It has a defensive earnings profile given its heavily needs-based portfolio, and has only a modest Auckland exposure. Relative to its listed peers, ARV has an attractive dividend and compares favourably on P/NAV and earnings multiples. Our rating is OUTPERFORM.
</div>
Jeremy Simpson, CFA jeremy.simpson@forsythbarr.co.nz +64 9 368 0022

Arvida Group Limited
1H20 Preview — Track Record Traction
Arvida Group (ARV) will report its 1H20 result on 19 November and we expect solid underlying EPS growth of +5% with all areas of its business continuing to strengthen. A key driver is expected to be a lift in new sales and resales volumes, while its development progress will be of significant interest given the lift in build activity underway and the new brownfield sites acquired in early FY20. OUTPERFORM.
Key things to look for in the result:

Steady EPS growth in a low growth world — Robust underlying profit growth of +16% is forecast given development activity and accretive acquisitions, although EPS will be lower due to the issuance of new shares. We expect that ARV’s track record of consistent operational performance across its retirement and aged care portfolios, successful integration of acquisitions and its improving development capability to again be highlighted in 1H20.
Realised fair value gains from new sales and resales a key driver — We expect ARV to benefit from a lift in sales volumes and unit pricing combined with steady margins, leading to a strong uplift in realised gains.
Stable key metrics — ARV is expected to maintain high occupancy in its aged care operation and to continue to be one of the highest rated in the sector in terms of DHB certification levels across its care facilities with 66% of its aged care facilities having the highest 4 year DHB certification as at June 2019. We also expect resales vacancy to remain under control given robust demand.
Development update as ARV ramps up activity — We expect ARV to be on track for its FY21 build target of 200 units and beds and we forecast 170 units to be delivered in FY20. In FY20 ARV is building across nine brownfield sites and its first greenfield site at Waimea Plains in Richmond.

Investor briefing for 19 November
Conference call: 10.30am (NZ time) NZ 0800 667 018, AU 1800 148 258. Passcode: 3777398
Figure 1. Summary of 1H20E forecast (NZ$m)




Six months ending 30 September


1H19


1H20E


% chg






Total revenue


87.4


95.7


9.5%




Normalised or underlying profit


17.9


20.8


16.2%




Underlying EPS (cps)


4.3


4.5


5.4%




DPS (cps)


2.6


2.9


9.6%




Source: Forsyth Barr analysis, company reports

Investment View
ARV has future growth prospects centred on brownfield and greenfield expansion. It has a defensive earnings profile given its heavily needs-based portfolio, and has only a modest Auckland exposure. Relative to its listed peers, ARV has an attractive dividend and compares favourably on P/NAV and earnings multiples. Our rating is OUTPERFORM.

Jeremy Simpson, CFA jeremy.simpson@forsythbarr.co.nz +64 9 368 0022

Arvida Group Limited: 1H20 Preview — Track Record Traction