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Daily ShareChat: AMP NZ Office

By Jenny Ruth

Thursday 17th February 2011

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 Jenny Ruth

AMP NZ Office (ANO) faces falling rentals over the next couple of years, says Buffy Gill, an analyst at Goldman Sachs & Partners.

Gill estimates the company's average per square metre rentals fell by around 1% in the three months ended December.

The company estimates its portfolio was over-rented (the extent to which contracted rentals exceeded market rentals) by 4.7% at June 30 last year.

“We believe that market rentals in office have shown further modest softness since that time and estimate that the portfolio is more likely to now be around 7% over-rented,” Gill says.

“Our forecasts reflect ANO's average per metre square rentals falling by this amount over the next two years before again re-exhibiting net growth,” she says.

At current levels, ANZ provides a reasonable 7.7% yield compared with the 7.4% sector average but dividends per share are expected to fall 5% over the next two years as the over-renting unwinds and tenants reflect as well as reflecting tax changes and rising interest rates.

“While we highly commend the new management’s approach and strongly believe the portfolio offers a quality exposure to office, the negative outlook remains,” Gill says.

“We struggle to see the stock outperforming the sector until it can demonstrate a better than average earnings per unit recovery and growth track.”


Recommendation: Hold.

DISCLAIMER: To the extent that any of the content above constitutes advice, it is general advice that has been prepared without reference to investor’s objectives, financial situation or needs. Before acting on any advice, investors should consider the appropriateness of the advice and IRG recommend that investors should obtain appropriate financial, legal and taxation advice before making any financial investment decision. The report is based on information compiled from public information and private research. IRG have completed the report on a best endeavours basis and do not accept any liability of loss or damage. IRG suggest that clients use this as part of a decision making process and check key data before making any investment decisions.
Employees may have an interest in the securities discussed in this report.

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