Sharechat Logo

Kiwi Income Property cut to ‘hold’ as rental income, earnings seen stalling in 2016, Craigs says

Wednesday 21st May 2014

Text too small?

Kiwi Income Property Trust, which yesterday posted a 7.8 percent drop in annual profit, was cut to 'hold' from 'buy' by Craigs Investment Partners.

The brokerage revised its forecasts to show earnings and dividends are likely to stall in 2016 as Kiwi Income steps up its tax payments and rental income is crimped as its Unisys House office tower at 56 The Terrace in Wellington is vacated for 21 months as part of a $67 million refurbishment for the Ministry of Social Development.

"The Unisys House redevelopment will result in little or no income over FY15F and FY16F versus $5.4m in FY14," Craigs analyst Chris Byrne said in a note. "This underpins a significant decline in FY16F distributable profit and earnings per unit."

Byrne reduced his 12-month price target for the stock to $1.20 from $1.21 and downgraded his recommendation, noting at $1.16 the units are trading at a 3 percent discount to the target.

Craigs pulled back its expectation for 2016 rental income by 5 percent to $152.2 million, from an estimated $152 million in 2015, and reduced its expectation for 2016 earnings before interest and tax by 12 percent to $133.7 million from an estimated $133.9 million in 2015.

Distributable profit, from which the company pays unitholders, is likely to fall to $70.6 million in 2016 from $74.7 million in 2015, while payments to unitholders will probably remain unchanged at 6.5 cents in 2016, according to Craigs.

Meantime, Kiwi Income's sale of its property at 205 Queen St, Auckland, will reduce the trust's 2015 net rental income by about $7 million, Craigs said.

Auckland-based Kiwi Income said yesterday net income fell to $101.3 million in the year ended March 31, from $109.8 million a year earlier, as costs from exiting its management contract with Commonwealth Bank of Australia outweighed benefits from valuation gains and insurance payments.

Craigs said it had previously expected Kiwi Income to pay no tax in 2015 but now expects a $6 million charge because only $11 million remains of a deferred tax credit from a payment to take its management contract inhouse. The brokerage also increased its normalised tax rate assumption for 2016 to 20 percent from 15 percent, compared with an estimated rate of 8 percent in 2015.

 

BusinessDesk.co.nz



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar eases on technical factors, buoyed by higher dairy prices
RBNZ eyes Westpac Australia money laundering failures
Heritage buys Golden Healthcare; not mystery Metlife suitor
Alliance margins improve as swine fever boosts global meat prices
RBNZ eyes Westpac Australia money laundering failures
Precinct eyes new developments as Commercial Bay keeps to revised schedule
End to Tower's three year dividend drought in sight
Vital Healthcare's manager appoints new independent director
Argosy lifts first-half profit 15.2% on valuation gains
Metlifecare attracts 'credible' bidder after biggest trading day in 2 1/2 years

IRG See IRG research reports