Daily ShareChat: Listed property trusts

By Jenny Ruth

Thursday 10th June 2010

Tax changes in the government's budget, including the removal of depreciation of buildings, will cut distributable earnings across the listed property sector by between 5% and 6% in 2012, says Goldman Sachs JB Were analyst Buffy Gill.

"All listed property trusts are now expected to suffer from a declining dividends-per-unit track over the next three years with total distributions forecast to fall by 9% by 2013," Gill says.

"We have a neutral to negative view on property; however this is moderating given we believe downside risk from tax changes is now largely priced in."

The sector as a whole will yield about 7.1% in 2012 and 2013 compared with Gill's long-term fair value yield of 6.9%, making it look justly priced.

The sector is trading at a 12% discount to net tangible assets. While this looks attractive compared with the historical 4% discount, the factors which could narrow the discount, higher earnings and distributions, "would appear to be relatively difficult for any of the listed property trusts at present."
Her yield and growth-based methodology, which she regards as the best benchmark for value, suggests Goodman Property Trust is the most undervalued of the property stocks while AMP Office Trust and Kiwi Income Property Trust look fairly valued, Gill says.

ING Property Trust and Property for Industry look moderately over-valued, she says.

Recommendations:

Goodman (NZX: GPT )- buy below $1.04
Property for Industry (NZX: PFI ) - sell above 93 cents
ING (NZX: ING ) - sell above 72 cents
Kiwi Income (NZX: KPT ) AMP Office (NZX: APT ) - hold.

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