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>
March Market Update —&nbsp;ARValuable&nbsp;as Gold
OUTPERFORM
ARV has released its March update and the business is on track for strong EPS growth in FY20 as it continues to advance all parts of its business. It continues to steadily lift the quality of its retirement village product, aged care operation and has future growth prospects centred on brownfield and greenfield expansion. ARV has a defensive earnings profile given its heavily needs-based portfolio, highly rated care facilities and wide geographic spread of operations. ARV has established a strong track record since listing on the NZX in 2014. Relative to its listed peers, ARV has an attractive dividend yield and compares favourably on P/NAV and earnings multiples. Our rating remains OUTPERFORM and no change to our NZ$2.03 target price.
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<tbody>
<tr>
<td style="width: 48pt;">NZX Code</td>
<td style="width: 48pt;">ARV</td>
<td style="width: 48pt;">Financials:Mar/</td>
<td style="width: 40.2pt;">19A</td>
<td style="width: 42.6pt;">20E</td>
<td style="width: 43.2pt;">21E</td>
<td style="width: 48pt;">22E</td>
<td style="width: 48pt;">Valuation (x)</td>
<td style="width: 42.6pt;">19A</td>
<td style="width: 42.6pt;">20E</td>
<td style="width: 48pt;">21E</td>
<td style="width: 42.6pt;">22E</td>
</tr>
<tr>
<td style="width: 48pt;">Share price</td>
<td style="width: 48pt;">NZ$1.73</td>
<td style="width: 48pt;">NPAT* (NZ$m)</td>
<td style="text-align: left; width: 40.2pt;">38.6&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">54.5</td>
<td style="text-align: left; width: 43.2pt;">66.6&nbsp;</td>
<td style="text-align: left; width: 48pt;">75.3&nbsp;</td>
<td style="width: 48pt;">EV/EBITDA</td>
<td style="text-align: left; width: 42.6pt;">22.0&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">17.1</td>
<td style="text-align: left; width: 48pt;">14.4&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">12.7&nbsp;</td>
</tr>
<tr>
<td style="width: 48pt;">Target price</td>
<td style="width: 48pt;">NZ$2.03</td>
<td style="width: 48pt;">EPS* (NZc)</td>
<td style="text-align: left; width: 40.2pt;">9.3&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">10.8&nbsp;</td>
<td style="text-align: left; width: 43.2pt;">12.3&nbsp;</td>
<td style="text-align: left; width: 48pt;">13.9&nbsp;</td>
<td style="width: 48pt;">EV/EBIT</td>
<td style="text-align: left; width: 42.6pt;">24.5&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">18.8&nbsp;</td>
<td style="text-align: left; width: 48pt;">15.9&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">14.0&nbsp;</td>
</tr>
<tr>
<td style="width: 48pt;">Risk rating</td>
<td style="width: 48pt;">Medium</td>
<td style="width: 48pt;">EPS growth* (%)</td>
<td style="text-align: left; width: 40.2pt;">4.8</td>
<td style="text-align: left; width: 42.6pt;">16.1</td>
<td style="text-align: left; width: 43.2pt;">13.5</td>
<td style="text-align: left; width: 48pt;">13.1&nbsp;</td>
<td style="width: 48pt;">PE</td>
<td style="text-align: left; width: 42.6pt;">18.5&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">16.0&nbsp;</td>
<td style="text-align: left; width: 48pt;">14.1&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">12.5&nbsp;</td>
</tr>
<tr>
<td style="width: 48pt;">Issued shares</td>
<td style="width: 48pt;">541.9m</td>
<td style="width: 48pt;">DPS (NZc)</td>
<td style="text-align: left; width: 40.2pt;">5.4&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">6.2&nbsp;</td>
<td style="text-align: left; width: 43.2pt;">6.8&nbsp;</td>
<td style="text-align: left; width: 48pt;">7.6&nbsp;</td>
<td style="width: 48pt;">Price/NTA</td>
<td style="text-align: left; width: 42.6pt;">1.3</td>
<td style="text-align: left; width: 42.6pt;">1.4&nbsp;</td>
<td style="text-align: left; width: 48pt;">1.4</td>
<td style="text-align: left; width: 42.6pt;">1.4&nbsp;</td>
</tr>
<tr>
<td style="width: 48pt;">Market cap</td>
<td style="width: 48pt;">NZ$937m</td>
<td style="width: 48pt;">Imputation (%)</td>
<td style="text-align: left; width: 40.2pt;">80</td>
<td style="text-align: left; width: 42.6pt;">80</td>
<td style="text-align: left; width: 43.2pt;">80</td>
<td style="text-align: left; width: 48pt;">80</td>
<td style="width: 48pt;">Cash div yld (%)</td>
<td style="text-align: left; width: 42.6pt;">3.1</td>
<td style="text-align: left; width: 42.6pt;">3.6</td>
<td style="text-align: left; width: 48pt;">3.9&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">4.4&nbsp;</td>
</tr>
<tr>
<td style="width: 48pt;">Avg daily turnover</td>
<td style="width: 48pt;">473.7k (NZ$703k)</td>
<td colspan="3" style="width: 130.8pt;">*Based on normalised profits</td>
<td style="width: 43.2pt;"></td>
<td style="width: 48pt;"></td>
<td style="width: 48pt;">Gross div yld (%)</td>
<td style="text-align: left; width: 42.6pt;">4.1</td>
<td style="text-align: left; width: 42.6pt;">4.7</td>
<td style="text-align: left; width: 48pt;">5.1&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">5.8&nbsp;</td>
</tr>
</tbody>
</table>
On track for a strong FY20
New sales for the first 11 months of FY20 were 101 units and&nbsp;resales&nbsp;were 244 units, both are on track with our FY20 forecasts of 125 new sales and 288&nbsp;resales. Average&nbsp;resales&nbsp;pricing is up +11%, also in line with our forecasts, as are margin gains that are up +56%. Total 3Q sales were up +46% on the&nbsp;pcp. We have not changed our forecasts and continue to expect 16%&nbsp;EPS&nbsp;growth in FY20 and 14% in FY21.
Operating well
Resales&nbsp;vacancy remains low at only 49&nbsp;units which is &lt;2% of its stock, and aged care occupancy sits at a high 95%.&nbsp;ARV&nbsp;confirmed it now has 80% of its care facilities graded to the 4 year highest&nbsp;DHB&nbsp;certification level. Resident satisfaction levels are very high with a net promoter score (NPS) above 50.&nbsp;ARV&nbsp;has reached an agreement with an Australian home care company to use its technology in NZ and believes this fits with its outwardly facing community strategy.
Developing outcomes
Development activity is on track for 200 units/care suites to be built in FY20 and for 250+ in FY21, which is in line with forecasts. Greenfield development progress continues with digging in the ground in Kerikeri, 25 villas and the resident clubhouse underway at Richmond and the next stage of 20 villas and advanced planning stages for the resident clubhouse and the care facility in Queenstown. ​​​​​​​Late in CY20 ARV will complete new care suite facilities at Aria Bay in Auckland and Copper Crest in Tauranga which will represent the first of its next generation care suite product, with ARV looking to start selling down via occupation right agreements.
Jeremy Simpson CFA jeremy.simpson@forsythbarr.co.nz +64 9 368 0022

Arvida Group Limited
March Market Update —&nbsp;ARValuable&nbsp;as Gold
OUTPERFORM
ARV has released its March update and the business is on track for strong EPS growth in FY20 as it continues to advance all parts of its business. It continues to steadily lift the quality of its retirement village product, aged care operation and has future growth prospects centred on brownfield and greenfield expansion. ARV has a defensive earnings profile given its heavily needs-based portfolio, highly rated care facilities and wide geographic spread of operations. ARV has established a strong track record since listing on the NZX in 2014. Relative to its listed peers, ARV has an attractive dividend yield and compares favourably on P/NAV and earnings multiples. Our rating remains OUTPERFORM and no change to our NZ$2.03 target price.
         


NZX Code
ARV
Financials:Mar/
19A
20E
21E
22E
Valuation (x)
19A
20E
21E
22E


Share price
NZ$1.73
NPAT* (NZ$m)
38.6&nbsp;
54.5
66.6&nbsp;
75.3&nbsp;
EV/EBITDA
22.0&nbsp;
17.1
14.4&nbsp;
12.7&nbsp;


Target price
NZ$2.03
EPS* (NZc)
9.3&nbsp;
10.8&nbsp;
12.3&nbsp;
13.9&nbsp;
EV/EBIT
24.5&nbsp;
18.8&nbsp;
15.9&nbsp;
14.0&nbsp;


Risk rating
Medium
EPS growth* (%)
4.8
16.1
13.5
13.1&nbsp;
PE
18.5&nbsp;
16.0&nbsp;
14.1&nbsp;
12.5&nbsp;


Issued shares
541.9m
DPS (NZc)
5.4&nbsp;
6.2&nbsp;
6.8&nbsp;
7.6&nbsp;
Price/NTA
1.3
1.4&nbsp;
1.4
1.4&nbsp;


Market cap
NZ$937m
Imputation (%)
80
80
80
80
Cash div yld (%)
3.1
3.6
3.9&nbsp;
4.4&nbsp;


Avg daily turnover
473.7k (NZ$703k)
*Based on normalised profits


Gross div yld (%)
4.1
4.7
5.1&nbsp;
5.8&nbsp;



On track for a strong FY20
New sales for the first 11 months of FY20 were 101 units and&nbsp;resales&nbsp;were 244 units, both are on track with our FY20 forecasts of 125 new sales and 288&nbsp;resales. Average&nbsp;resales&nbsp;pricing is up +11%, also in line with our forecasts, as are margin gains that are up +56%. Total 3Q sales were up +46% on the&nbsp;pcp. We have not changed our forecasts and continue to expect 16%&nbsp;EPS&nbsp;growth in FY20 and 14% in FY21.
Operating well
Resales&nbsp;vacancy remains low at only 49&nbsp;units which is &lt;2% of its stock, and aged care occupancy sits at a high 95%.&nbsp;ARV&nbsp;confirmed it now has 80% of its care facilities graded to the 4 year highest&nbsp;DHB&nbsp;certification level. Resident satisfaction levels are very high with a net promoter score (NPS) above 50.&nbsp;ARV&nbsp;has reached an agreement with an Australian home care company to use its technology in NZ and believes this fits with its outwardly facing community strategy.
Developing outcomes
Development activity is on track for 200 units/care suites to be built in FY20 and for 250+ in FY21, which is in line with forecasts. Greenfield development progress continues with digging in the ground in Kerikeri, 25 villas and the resident clubhouse underway at Richmond and the next stage of 20 villas and advanced planning stages for the resident clubhouse and the care facility in Queenstown. ​​​​​​​Late in CY20 ARV will complete new care suite facilities at Aria Bay in Auckland and Copper Crest in Tauranga which will represent the first of its next generation care suite product, with ARV looking to start selling down via occupation right agreements.
Jeremy Simpson CFA jeremy.simpson@forsythbarr.co.nz +64 9 368 0022


Arvida Group Limited: March Market Update — ARValuable as Gold