KPG - Kiwi Property Group

[Basil]

This transaction will draw in other interest too. Agree, this is a VERY positive announcement.

[LaserEyeKiwi]

yes I can't really think of two better anchor tenants (even if they aren't technically tenants) than IKEA & Costco, and KPG has managed to get one of them in both of its most important locations (IKEA at Sylvia park & now Costco at Drury).

[LaserEyeKiwi]

Trying to think of who else will now be lining up to get into Drury with either a deal to buy land or to lease.

Already got New World going in.

Presumably one of either Mitre10 or Bunnings will be jostling to get in.

Homewares I presume a Kmart or a Briscoes.

Funnily enough I asked AI what are the most desired anchor tenants for new retail developments, and it gave me IKEA & Costco as the preeminent names.

[LaserEyeKiwi]

The herald has more details on the deal. Costco saying the new location will serve both people in south Auckland as well as Hamilton and the wider Waikato region.

https://www.nzherald.co.nz/property/new-zealands-second-giant-costco-wholesale-to-be-built-at-drury/DSRQXPVDIZFJ3HEWX7PEYIPAZM/

[LaserEyeKiwi]

Good seeing every NZ news site with headline saying "Auckland to get 2nd Costco store" and discussing KPGs Drury development.

[Basil]

Funnily enough I asked AI what are the most desired anchor tenants for new retail developments, and it gave me IKEA & Costco as the preeminent names.

Nice work mate.    I agree 100%, this is a MAJOR milestone in this development being really successful.
 

[Waltzing]

https://claude.ai/public/artifacts/bc283a94-6693-4cad-b5d3-d4acdfe782d1

[Basil]

Good seeing every NZ news site with headline saying "Auckland to get 2nd Costco store" and discussing KPGs Drury development.

I think if this was announced in any other week where there wasn't a major capital raise underway, (VHP sucking ~ $200m out of the commercial property sector this week with its capital raise due for settlement on Friday 14th) it would have added a couple of cents to the share price as this really is a super positive milestone achievement for this development.  Other business's will flock to this development now as sure as day follows night.  I topped up with a few more today taking advantage of the price being temporarily suppressed with so much oxygen currently being sucked out of the room.

Craigs recently upgraded their target price to $1.18, (last last month before today's positive announcement) and its their #1 pick in the sector.  Interest rates headed lower with another RBNZ cut later this month, (26 November) makes this a real prospect to be $1.20+ in due course.  Noting also that KPG trades cum another quarterly dividend payable next month and their half year reporting is on 24 November.

[winner (n)]

Had another look at the correlation between KPG share price and 10 Year Govt stock since 2008. There is a strong correlation so worth while tracking

Currently with 10 Year stock at 4.19% the KPG share price is very slightly underpriced .... or if yiu consider the ranges neither overpriced nor underpriced

Bur Craigs love them so that's all that matters eh

[lorraina]

I have been slowly adding to our holdings,as the last few positive announcements make good sense to me.
We also hold CDI.
Both companies are well managed and have sound strategies.

[Basil]

What Craigs highlighted is that KPG is the most likely in the listed commercial property sector to be able to grow distributable income in the years ahead.  Forecasting a CAGR in distributable income of ~ 3.5% per annum so its not necessarily all about the current yield..  For what its worth I added even more this morning.  Cash is returning almost nothing whereas for 39% taxpayers KPG is returning ~ 9% gross equivalent return, (will be somewhat lower effective gross return for taxpayers on lower tax rates), on its forecast next years distributable tax free income of 5.8 cps.  I also think we're probably at or close too the bottom of the retail cycle and KPG is best placed to capture additional income as the economy gradually recovers.

[seaweed]

What Craigs highlighted is that KPG is the most likely in the listed commercial property sector to be able to grow distributable income in the years ahead.  Forecasting a CAGR in distributable income of ~ 3.5 so its not necessarily all about the current yield..  For what its worth I added even more this morning.  Cash is returning almost nothing whereas for 39% taxpayers KPG is returning ~ 9% gross equivalent return, (will be somewhat lower effective gross return for taxpayers on lower tax rates), on its forecast next years distributable tax free income of 5.8 cps.  I also think we're probably at or close too the bottom of the retail cycle and KPG is best placed to capture additional income as the economy gradually recovers.

Looks like easy buying at the moment with plenty of sellers. IRD still owe me $1000s for my imputation credits which will be carried forward to next year. LOL

[winner (n)]

Seems future dividend growth is going to be a lot better than the last 5 years

From a preso Assuming a 5.60 cps full-year 2026 dividend, the 2021-2026 dividend CAGR would be 1.7%



From 2021 to 2025 dividend growth was 1.2% pa
FYI Argosy numbers are 0.8% pa and 0.6% pa
Least they increasing but we need to see capital gains as well

[LaserEyeKiwi]

Although we are a bit off recent highs, it's amazing seeing the inevitable rush back into high dividend yield paying REITs over the last couple of quarters as bank interest rates have plummeted.

And to think there was doubt when those of us were saying this at the bottom of the cycle when stocks like KPG were trading 30% lower not that long ago.

Patience really is one of the core qualities needed to be a successful investor.

(For what its worth I am still investing with the belief that retail is the next cycle to recover - and we will all be sitting here in a years time marveling out how cheap retail stocks were today given the retail recovery was inevitably going to occur eventually)

[Basil]

Seems future dividend growth is going to be a lot better than the last 5 years

From a preso Assuming a 5.60 cps full-year 2026 dividend, the 2021-2026 dividend CAGR would be 1.7%
From 2021 to 2025 dividend growth was 1.2% pa
FYI Argosy numbers are 0.8% pa and 0.6% pa
Least they increasing but we need to see capital gains as well

Makes sense when you consider we've been in a very deep recession since Covid hit more than 5 years ago.

Agree LEK, it was fantastic buying in the 80's cents range a while back but it's still good buying.