Property Stocks

[Basil]

I can't make any sense of the gross yields posted.  I surmise with many of these companies being a PIE the effective yield its worth to an investor is determined by their own marginal tax rate.

For example with KPG, their new lower rate of 5.4 cents in annual dividends being PIE income its worth 5.4 / 0.67 = 8.06 cps gross to investors on a 33% tax rate so a gross yield of just over 10% to anyone that bought last week at 80 cents as well as the prompt return of 1.425 cps from Q4 FY24's dividend giving effective net entry price of 80-1.425 = 78.6 cps.  On that net cost basis, the effective gross yield on FY25 income is 8.06 / 78.6 = 10.25%.  Not too shabby at all.
Certainly, that's an attractive yield given their NTA was recently reported to be amongst the most stable of the group. 
On the other hand a massive write-down on GMT's portfolio value and only a very, very modest yield.  One of these is not like the others alright and not necessarily in a good way.

[Waltzing]

GMT - looks like the market likes warehouses over other sorts of houses and malls....

[Waltzing]

If this GOVT is spending more than the last one ... will it mean property being rented the GOVT wont decrease and COMP PROPS will continue to be supported by higher GOVT debt spending?

https://www.taxpayers.org.nz/240531_budget_newsletter

will the comp props get a bounce as the OCR starts to be cut at some point... its the at SOME POINT ...

[LaserEyeKiwi]

I can't make any sense of the gross yields posted.  I surmise with many of these companies being a PIE the effective yield its worth to an investor is determined by their own marginal tax rate.

For example with KPG, their new lower rate of 5.4 cents in annual dividends being PIE income its worth 5.4 / 0.67 = 8.06 cps gross to investors on a 33% tax rate so a gross yield of just over 10% to anyone that bought last week at 80 cents as well as the prompt return of 1.425 cps from Q4 FY24's dividend giving effective net entry price of 80-1.425 = 78.6 cps.  On that net cost basis, the effective gross yield on FY25 income is 8.06 / 78.6 = 10.25%.  Not too shabby at all.
Certainly, that's an attractive yield given their NTA was recently reported to be amongst the most stable of the group. 
On the other hand a massive write-down on GMT's portfolio value and only a very, very modest yield.  One of these is not like the others alright and not necessarily in a good way.

Just using the NZX website figure for the "Gross Divi" (which is a day delayed - have updated now for last Friday close).

Have also added last/current eyar dividend CPS per company reports, along with the guided forward FY25 dividend for those companies that have given it so far.

 

[LaserEyeKiwi]

If this GOVT is spending more than the last one ... will it mean property being rented the GOVT wont decrease and COMP PROPS will continue to be supported by higher GOVT debt spending?

https://www.taxpayers.org.nz/240531_budget_newsletter

will the comp props get a bounce as the OCR starts to be cut at some point... its the at SOME POINT ...

no not really - most governmemt departments have had their budgets cut. Basically everything outside of Health, education & foreign affairs. Staff cuts are fairly quick to do, but leases expiring or exiting early will take a lot longer, but are already well underway in Wellington.

Also have to remember that in the budget "spending" includes the amount being "spent" on tax cuts (which is a weird way to classify it, but that's how it's done). So the $3.6B in tax cuts for this current year was a big chunk of the new spending in this years budget.

Also have to factor in the large amount of extra new debt the government is taking on to pay for the tax cuts, which means higher interest payments.

[Waltzing]

Which mean then investors will want to look at property stocks that are auckland based? and mostly private enterprise leases...

wonder which COMP PROP has the best lease stats at the moment... KPG now being in the housing market ... there lastest Capability brown project being underway and the results some way off ?

https://en.wikipedia.org/wiki/Capability_Brown

[LaserEyeKiwi]

Which mean then investors will want to look at property stocks that are auckland based? and mostly private enterprise leases...

wonder which COMP PROP has the best lease stats at the moment... KPG now being in the housing market ... there lastest Capability brown project being underway and the results some way off ?

https://en.wikipedia.org/wiki/Capability_Brown

They all are in the very high 90%'s occupancy (most 99%+)

[Buzz]

They all are in the very high 90%'s occupancy (most 99%+)

And most of them are trading massively below NTA, or liquidation value if you like. Anyone who has been through '87, '08/09, Covid as well, will know shit happens in the market SP and when it does that is the best time to get some, or a lot and look towards a prosperous future. Especially if the stock continues to pay an above average dividend while your capital stagnates, because property business prosperity is not tightly coupled to the stock market pricing. By all means exit the stock and abandon the dividends when events turn against us, if you are capital sensitive, but never miss the re-entry or the accumulation. The property sector is screaming 'buy me', interest rates are going lower soon, property is still in demand and will continue to be so. NZ is built on property, there are many avenues to partake in it, the NZX is one of them. Its time will and is coming back. Question only is imo whether you're part of it, and when.

[Waltzing]

PCT moving into the living space...  following KIP..

https://www.nzherald.co.nz/business/precinct-properties-apartment-push/HTCPOZYAGNGHPFWOXNPGFR4HRU/

[Waltzing]

ARG bouced UP yesterday to 1.09...

is this sign that the market see value in this sector at these levels for some COMP PROPS.

[Waltzing]

rerate of com props starting 2025 or sooner? GDP out tomorrow...

[Cod]

rerate of com props starting 2025 or sooner? GDP out tomorrow...

If the market is forward looking by 6 months and the first cut is Feb as ANZ expect (07-06 RNZ) then the rerate would happen in September, but personally I wouldn't bank on it, it's just possible.

[Waltzing]

ARG getting a few hundreds thousand going through  today... some real bargains some investors are thinking ...  NZX had a good day ... more to come in the spring? two rate cuts by march 31st at leasr?

[Waltzing]

Orders building in ARG ...  they know this is a possible low point for the next bull market cycle...

[Basil]

Yes...it was a big lurch from Adrian Orr from being extremely hawkish to now being quite dovish.
ARG forecasting 6.65 cps in dividends for FY25 and its a PIE fund so that's tax free in shareholders hands and to investors on a 33% tax rate is worth the same as 6.65 / 0.67 = 9.93 cps gross.
On a $1.025 share price that's a gross effective yield of 9.7%.
Good buying for that yield and a decent discount to NTA of $1.45 noting 51% of their portfolio is invested in the most favoured industrial building sector.

Disc: I broke my hiatus from buying NZX listed shares this morning and bought a few at that price.  If we're not at the bottom of the commercial property cycle, I think we are very close.