KPG - Kiwi Property Group

[BlackPeter]

I have some KPG at a nice low average price, and really like the current business and future prospects, and the sustained quarterly dividends and yields.

I've deleted the rest of my post, on reflection I'm not worthy of an opinion having only posted occasionally, apparently.

 

Hi Buzz, I (and I think most of the readers here) do enjoy your contributions. While I don't remember (or know) what incident your concluding comment refers to - everybody is entitled to their opinion, and in your case I can't really remember that you ever expressed your opinion in an inappropriate way.

So - please ... let these posts come in!

[kiwi2007]

Looks like someone likes them - decent volume both Friday and so far today.

Bond prices rising and yields falling (or have fallen) maybe has some influence.

[winner (n)]

Yes, Sylvia Psrk busy as

Boxing Day shoppers have also descended on Sylvia Park, causing stressed retail workers to burst into tears.

https://www.nzherald.co.nz/nz/boxing-day-sales-retailers-in-tears-as-crowds-descend-onto-sylvia-park/FJ5QXOMPEJCZFOD3ZCPWD7EILI/

[Shareguy]

I think this is a good move but would like to see the agreement in detail. KPG maybe have concerns about the rent prices they were expecting and issues with renting and demand. Otherwise why would you do this when they were promoting a community of long term renters with average rent of $800 Pw per unit from memory.


https://www.nzx.com/announcements/427017

[Basil]

I smell a rat, (with apologies to Woolworth Dunedin lol).  Lack of demand from tenants at their asking prices ?

[lorraina]

Looks a good deal for both Urban Rest and KPG to me.

[Shareguy]

I smell a rat, (with apologies to Woolworth Dunedin lol).  Lack of demand from tenants at their asking prices ?

We own a 3 BRM 110 2m apartment under 10 years old in Panmure in gated complex with internal garage and get $700 PW.

[Basil]

We own a 3 BRM 110 2m apartment under 10 years old in Panmure in gated complex with internal garage and get $700 PW.

Makes you think eh.  Friend rents a very large, suitable for his extended family, (~ $2m value) 4 bedroom home in West Harbour with city and sea views for $800 a week.  Does make you wonder why someone would pay $800 pwk for a 2 bedroom unit at Sylvia park.  Oh well, I suppose KPG's management know best after all their shares have been such an outstanding success being priced lower now than 25 years ago despite the real estate market being up ~ 500% in that time.
"Trust us we know what we are doing" Thanks, but no thanks lol

[BlackPeter]

I smell a rat, (with apologies to Woolworth Dunedin lol).  Lack of demand from tenants at their asking prices ?

I am not surprised you imagine the smell of a dead rat in the ointment - fits well to your previous narrative. Do they call this conviction bias?

Obviously - with BTR only starting in NZ, one could see this as well as a sensible diversification strategy for their first big object - and as far as I can see, they do make money with it.

I'd see it as a sensible strategy to fill the object fast - without the need to do all the management by themselves, but hey - why would anybody assume that anything they might do could be sensible?

[LaserEyeKiwi]

Kiwi Property valuations hold firm despite headwinds

4/4/2024, 9:56 am GENERAL

Kiwi Property today announced its draft valuations for the six months ended 31 March 2024, recording a 0.1% or $3.6 million increase in the fair value of its property portfolio, which was expected to be worth $3.2 billion at the end of the period.

Kiwi Property Chief Executive Officer Clive Mackenzie said: "It's encouraging to see the value of our diversified property portfolio holding firm, despite the slow economy and high interest rate environment.

"The sustained performance of assets such as Sylvia Park and The Base is a testament to their resilience and highlights the merit of our mixed-use strategy. While the market has seemingly priced-in further write-downs of our property portfolio, based on the latest valuations, those concerns may be overdone."

The draft valuations are expected to result in the following movements through the period:
• Mixed-use portfolio: +0.8% or +$16.0 million, underpinned by stable capitalisation rates and robust trading.
• Office portfolio [Note 1]: -1.9% or -$16.2 million, due to continued headwinds in the office sector.
• Retail portfolio: -0.4% or -$0.6 million, with valuations flat in aggregate.
• Other properties: +3.1% or +$4.5 million, reflecting the continued progress of earthworks at Drury.
• Net tangible asset backing per share: $1.17. No change.

Kiwi Property's draft asset valuations are subject to final independent audit, finalisation of year-end book values and will be confirmed in the company's annual results for the year ended 31 March 2024, due to be released on 27 May 2024.

ENDS

Note:
1. Includes assets held for sale.

Contact us for further information:

Campbell Hodgetts
Head of Communications and Investor Relations
campbell.hodgetts@kp.co.nz

[Plata]

Unfortunately the market seems to disagree, like with all the other reits. It really triggers me that they don't even open a buy back facility with this kind of discount. In theory buying and cancelling KPG shares gives an instant zero-risk 40% capital appreciation on any money spent doing so, as if any of the other stuff they want to build would offer that.

Disc: hold unhappily

[Apollo]

Unfortunately the market seems to disagree, like with all the other reits. It really triggers me that they don't even open a buy back facility with this kind of discount. In theory buying and cancelling KPG shares gives an instant zero-risk 40% capital appreciation on any money spent doing so, as if any of the other stuff they want to build would offer that.

Disc: hold unhappily

If they had the cashflow to buy back shares wouldn't it be better to up the dividend. Or are you suggesting borrowing to buy back shares. Haven't higher interest rates already shown what a crock NTA is for the property companies?

[BlackPeter]

Unfortunately the market seems to disagree, like with all the other reits. It really triggers me that they don't even open a buy back facility with this kind of discount. In theory buying and cancelling KPG shares gives an instant zero-risk 40% capital appreciation on any money spent doing so, as if any of the other stuff they want to build would offer that.

Disc: hold unhappily

Why unfortunately? It is normal that the market disagrees with various valuation methods, and as we know, sometimes the market turns out to be right and sometimes the valuation. Just one of these things that nobody can predict the future.

I guess it depends on your investment strategy. If you are one of these people who love to run with the flock (momentum investors), than clearly KPG is currently not a good buy for you (though it might be - it just touched the MA100).

If you are relying on fundamentals, than you would consider it as fortunate if the market
undervalues your target. I like to buy quality on special and never understand the people who only buy things if they are dear.

Just imagine being a wild horse in a herd of mustangs. Some run always with the herd and stampede where everybody goes. Obviously - this is sometimes a valid strategy (otherwise mustangs would not have survived for a long time), but sometimes it leads down the abyss (or into captivity).

Others look at the big picture and notice only with interest what the herd is doing. Results sometimes in disappointments, but at least you know that you are the master of your own destiny.

Re your other point (why don't they buy back), you might be right ... but obviously the question is  whether they can do better things with this money looking at the long run. KPG is a property company and I see it as positive if they find opportunities in this area instead of speculating with or against the market.

Anyway ... never good to be an unhappy holder. We don't you sell?

[Plata]

It's "unfortunately" because I have no desire to up my holding at the current price nor sell it for such a discount. Re the buyback I think about it like this. 1 dollar spent buying and cancelling shares at the current prices entitles you to $1.37 in net property assets that return around $0.082 per year. What property could you and I buy that would return that sort of money? If I knew that I'd be a property mogul by now. I think I did a post on this aaages ago and actually calculated the NTA and dividend accretion that a buyback could achieve. Regardless, KPG has never grown anything over the years despite capital raises, significant inflation in asset values and rents. The way I see it the only way this could occur is people making decisions have underestimated risks and overestimated returns on various investments.

I see it like so:
Borrow money, build something - Hopefully higher returns, investment case built on a wide range of forecasts 10+ years into the future. Predictions are hard, and KPGs performance over the last 20 years suggests they struggle at them.

Borrow money, buyback shares - Highly calculable returns, investment case built on forecasts of company costs, rental yields, asset valuations. Company costs for KPG can be predicted with reasonable accuracy given the simple nature of being a landlord, and with knowledge of all the rental agreements as landlord these can be predicted into the future too.

At this time I see daily the potential return the 2nd option could give, I have not seen any estimated returns for Drury. I feel that if the returns are even remotely comparable, given the risk differences, a buyback is the better choice for KPG. The only time I would say this is not the case, is if Drury is all or nothing. I.E. do drury and commit all liquidity into a hopefully income generating venture, OR buyback to the 5% limit then do nothing with the remaining liquidity because there isn't enough to proceed with Drury etc. They should be putting any spare liquidity (within the appropriate gearing range) into buyback and if there isn't enough for it, selling a property (so long as it isn't at a big discount to book value obviously)

[Buzz]

It's "unfortunately" because I have no desire to up my holding at the current price nor sell it for such a discount.

Thank you for your considered post. I have a different view, having accumulated a significant (relatively) portfolio position while the stock is in the doldrums, all the while enjoying an out-sized quarterly dividend.

My positon is 'well placed', imo, for a mid-long term outcome with sustained above average income while we wait for it to happen. Happy to hold as part of a currently well balanced portfolio.