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).

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Arvida Group Limited</h2>
1H20 Result — Building Well<a target="_blank"></a>
Arvida Group (ARV) has reported a strong 1H20 result with underlying profit of NZ$23.4m, up +31% with standout EPS growth of +16%. It was ahead of our expectations in terms of key operational metrics highlighting the continued robust demand ahead of our underlying profit forecast of NZ$20.8m. We have not changed our forecast and remain with an OUTPERFORM rating.
What’s changed?
<ul>
<li>Earnings: No changes</li>
<li>Target Price: Up 4 cps to NZ$1.78 due to the time value of money impact on our DCF valuation</li>
<li>Rating: Remains OUTPERFORM</li>
</ul>
Resales were a key highlight up +10% to 148 units
There were also strong gains in new sales and resales pricing, while margins also&nbsp;lifted versus the pcp. New sales were up strongly at 44 units, although below our forecast of 50 units. These metrics led to realised gains being NZ$17.9m, up +53% and ahead of our forecast of NZ$16.3m. The balance sheet is solid at ~27% geared, operating cash flow was up +17% and the 1H dividend is up +11.5% with the announcement of a 2Q20 dividend of 1.45cps.
Another period of delivery on all fronts
ARV continues to deliver to its strategy and has successfully integrated recent village acquisitions. It continues to lift its development capability and pipeline whilst leveraging its development expertise picked up from Fletchers and Sanderson Group. ARV has indicated it is on track to deliver 200 units in FY20 with 94 units delivered in 1H20 across eight sites. ARV is targeting another step up in FY21 to 250+ units, in line with our forecasts. Existing resales stock at 2% of the portfolio is stable and the 3% vacancy rate for new stock looks manageable given the contracts in place and the ongoing solid demand. The pipeline of 1,693 units implies ~7 years at the FY21 build rate.
A top rated large-scale care operator
ARV’s aged care remains very full at 95% average occupancy across its large care operation of 1,590 beds. ARV now has 18 of 26 care facilities with the maximum 4 year DHB certification following recent audits. A further four facilities are being audited in the coming months.
Defensive yield plus growth
ARV has an attractive blend of a solid dividend yield of ~5% on a 40% pay-out of underlying earnings and a building growth profile given its expanded development expertise, track record and pipeline. Our rating is OUTPERFORM and we continue to view ARV as attractively priced at 1.15x NAV.&nbsp;
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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.&nbsp;
</div>
Jeremy Simpson, CFA jeremy.simpson@forsythbarr.co.nz +64 9 368 0022

Arvida Group Limited
1H20 Result — Building Well
Arvida Group (ARV) has reported a strong 1H20 result with underlying profit of NZ$23.4m, up +31% with standout EPS growth of +16%. It was ahead of our expectations in terms of key operational metrics highlighting the continued robust demand ahead of our underlying profit forecast of NZ$20.8m. We have not changed our forecast and remain with an OUTPERFORM rating.
What’s changed?

Earnings: No changes
Target Price: Up 4 cps to NZ$1.78 due to the time value of money impact on our DCF valuation
Rating: Remains OUTPERFORM

Resales were a key highlight up +10% to 148 units
There were also strong gains in new sales and resales pricing, while margins also&nbsp;lifted versus the pcp. New sales were up strongly at 44 units, although below our forecast of 50 units. These metrics led to realised gains being NZ$17.9m, up +53% and ahead of our forecast of NZ$16.3m. The balance sheet is solid at ~27% geared, operating cash flow was up +17% and the 1H dividend is up +11.5% with the announcement of a 2Q20 dividend of 1.45cps.
Another period of delivery on all fronts
ARV continues to deliver to its strategy and has successfully integrated recent village acquisitions. It continues to lift its development capability and pipeline whilst leveraging its development expertise picked up from Fletchers and Sanderson Group. ARV has indicated it is on track to deliver 200 units in FY20 with 94 units delivered in 1H20 across eight sites. ARV is targeting another step up in FY21 to 250+ units, in line with our forecasts. Existing resales stock at 2% of the portfolio is stable and the 3% vacancy rate for new stock looks manageable given the contracts in place and the ongoing solid demand. The pipeline of 1,693 units implies ~7 years at the FY21 build rate.
A top rated large-scale care operator
ARV’s aged care remains very full at 95% average occupancy across its large care operation of 1,590 beds. ARV now has 18 of 26 care facilities with the maximum 4 year DHB certification following recent audits. A further four facilities are being audited in the coming months.
Defensive yield plus growth
ARV has an attractive blend of a solid dividend yield of ~5% on a 40% pay-out of underlying earnings and a building growth profile given its expanded development expertise, track record and pipeline. Our rating is OUTPERFORM and we continue to view ARV as attractively priced at 1.15x NAV.&nbsp;

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.&nbsp;

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

Arvida Group Limited: 1H20 Result — Building Well