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</h2>
<p><strong>Q1 Sales&nbsp;— Tracking Well Post&nbsp;Lockdown</strong></p>
<p><strong>OUTPERFORM</strong></p>
<p>Arvida&nbsp;Group (ARV) has announced total sales of 44 retirement village units for the quarter to 30 June 2020 (32 re-sales and 12 new sales). We walk away with three main conclusions; (1) much like for&nbsp;SUM's&nbsp;June quarter sales,&nbsp;Arvida's&nbsp;June quarter sales point to normal activity levels in June but also to some degree show May being back to "high" normal; (2) re-sale margins are holding up well (25%, up from 22%&nbsp;pcp) with the early signs of strong housing data on the macro level also showing up in the aged care sector; and (3) while new sales margins were down (to 15% from 21%) this was offset by higher priced units being sold and a higher level of new sale activity vs&nbsp;pcp. Going forward we believe cost control and ability to execute on its build program will be in focus. We continue to reverse our&nbsp;COVID-19 related downgrades and increase our FY21 estimates by 8%.&nbsp;ARV&nbsp;is valued on 14x FY22 (March) earnings. OUTPERFORM.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/146/196/original/image_71949368921594770936591.png?1594770939" class="editor-image img-responsive" data-smartkarma-image-id="146196"></figure>
<div>
<h3>1Q21 showing&nbsp;COVID&nbsp;impacts</h3>
</div>
<div id="m_-4577806539615067307i1v97-3-2-2">
<p>1Q21 was a quarter of significant disruption for ARV with new sales of 12 units and re-sales of 32 units, reflecting the impacts of no sales activity in April, given 4 weeks in Alert Level 4 lockdown, with prospective residents unable to visit villages and property settlements suspended. However, ARV note "this was a good result"; we concur, and early signs post lockdown are showing a resumption of sales activity with "good levels of demand and increasing enquiry since the easing of COVID-19 restrictions".&nbsp;</p>
</div>
<div>
<h3>No FY21 guidance provided</h3>
</div>
<div id="m_-4577806539615067307i1v97-2-2-2-2">
<p>ARV provided no additional guidance from its FY20 result on 26 May of ~200 delivered units (below the medium term delivery target of 250 units). However, at its recent Annual Shareholders Meeting ARV reaffirmed this guidance. In addition, ARV noted that its intention is to maintain its dividend policy with a payout ratio of 50% to 70% of underlying profit but will seek further clarity on the future economic environment before making that decision.</p>
</div>
<div>
<h3>Strong pricing levels driven by new sales</h3>
</div>
<div id="m_-4577806539615067307izli1x-2-2">
<p>Whilst sales activity for 1Q21 was negatively impacted by COVID-19 lockdowns, the impact of lockdowns placed no dampener on ARV's ability to sell high quality units across both new and re-sales. The strong pricing levels in the quarter is pleasing given the housing market uncertainty and a likely resultant of ARV's recent investment in high quality sites. "Pricing achieved for re-sales settled in the quarter was on average +3% ahead of unit values assumed by valuers as at 31 March 2020". In addition, ARV experienced a +5% uplift in total new and re-sale gains and a +7% uplift in total new and re-sales sales value on pcp. This was despite materially lower sales activity in the quarter and reflects the higher than average new and re-sales unit prices of NZ$942,000 and NZ$419,000, along with a material uplift in new sales settlements.</p>
</div>
<div>
<div>
<div><strong>Aaron Ibbotson CFA</strong></div>
<div><a href="mailto:aaron.ibbotson@forsythbarr.co.nz" target="_blank" rel="noopener">aaron.ibbotson@forsythbarr.co.<wbr>nz</a></div>
<div>+64 9 368 0024</div>
<div></div>
</div>
</div>
<div>
<div>
<div><strong>Matt Montgomerie</strong></div>
<div><a href="mailto:matt.montgomerie@forsythbarr.co.nz" target="_blank" rel="noopener">matt.montgomerie@forsythbarr.<wbr>co.nz</a></div>
<div>+64 9 368 0124</div>
</div>
</div>

Arvida Group
Q1 Sales&nbsp;— Tracking Well Post&nbsp;Lockdown
OUTPERFORM
Arvida&nbsp;Group (ARV) has announced total sales of 44 retirement village units for the quarter to 30 June 2020 (32 re-sales and 12 new sales). We walk away with three main conclusions; (1) much like for&nbsp;SUM's&nbsp;June quarter sales,&nbsp;Arvida's&nbsp;June quarter sales point to normal activity levels in June but also to some degree show May being back to "high" normal; (2) re-sale margins are holding up well (25%, up from 22%&nbsp;pcp) with the early signs of strong housing data on the macro level also showing up in the aged care sector; and (3) while new sales margins were down (to 15% from 21%) this was offset by higher priced units being sold and a higher level of new sale activity vs&nbsp;pcp. Going forward we believe cost control and ability to execute on its build program will be in focus. We continue to reverse our&nbsp;COVID-19 related downgrades and increase our FY21 estimates by 8%.&nbsp;ARV&nbsp;is valued on 14x FY22 (March) earnings. OUTPERFORM.


1Q21 showing&nbsp;COVID&nbsp;impacts


1Q21 was a quarter of significant disruption for ARV with new sales of 12 units and re-sales of 32 units, reflecting the impacts of no sales activity in April, given 4 weeks in Alert Level 4 lockdown, with prospective residents unable to visit villages and property settlements suspended. However, ARV note "this was a good result"; we concur, and early signs post lockdown are showing a resumption of sales activity with "good levels of demand and increasing enquiry since the easing of COVID-19 restrictions".&nbsp;


No FY21 guidance provided


ARV provided no additional guidance from its FY20 result on 26 May of ~200 delivered units (below the medium term delivery target of 250 units). However, at its recent Annual Shareholders Meeting ARV reaffirmed this guidance. In addition, ARV noted that its intention is to maintain its dividend policy with a payout ratio of 50% to 70% of underlying profit but will seek further clarity on the future economic environment before making that decision.


Strong pricing levels driven by new sales


Whilst sales activity for 1Q21 was negatively impacted by COVID-19 lockdowns, the impact of lockdowns placed no dampener on ARV's ability to sell high quality units across both new and re-sales. The strong pricing levels in the quarter is pleasing given the housing market uncertainty and a likely resultant of ARV's recent investment in high quality sites. "Pricing achieved for re-sales settled in the quarter was on average +3% ahead of unit values assumed by valuers as at 31 March 2020". In addition, ARV experienced a +5% uplift in total new and re-sale gains and a +7% uplift in total new and re-sales sales value on pcp. This was despite materially lower sales activity in the quarter and reflects the higher than average new and re-sales unit prices of NZ$942,000 and NZ$419,000, along with a material uplift in new sales settlements.



Aaron Ibbotson CFA
aaron.ibbotson@forsythbarr.co.nz
+64 9 368 0024





Matt Montgomerie
matt.montgomerie@forsythbarr.co.nz
+64 9 368 0124



Arvida Group: Q1 Sales — Tracking Well Post Lockdown