By Jenny Ruth
Wednesday 20th October 2010 1 Comment |
Text too small? |
DNZ Property Fund is New Zealand's fifth largest listed property entity with a diversified portfolio with 52 medium-sized assets of average "B-grade" quality, long weighted average lease terms, high occupancy, a strong customer base and a track record of rental growth, says Buffy Gill at Goldman Sachs JB Were.
The company has opportunities within its portfolio including developing remaining land and its active management team appears to have a solid understanding of the portfolio and tenants, Gill says.
It also has "an internalised structure leading to a high level of alignment of interests between management and shareholders," she says.
On her forecasts, DNZ provides a healthy running cash yield of 7%, Gill says.
"More importantly, we believe it has the ability to maintain this dividend over the next three years due to fixed lease structures, developments coming on line and debt facilities being locked in for three years."
DNZ shares are trading at a significant discount to her estimated realiseable net tangible assets valuation of $1.58 per share and she has a $1.27 12-month target.
The internalised management structure means management is strongly incentivised to close the valuation gap, Gill says. Potential ways to close the gap include recycling assets, developing land and faster leasing up of vacant space and DNZ could also participate in industry consolidation.
Recommendation: Buy.
DNZ appoints Auckland Airport property GM Peter Alexander as new chief
DNZ Property sells $60M of shares to institutions at 1.8 percent discount
DNZ annual earnings fall 14 percent, signals $80M capital raising for new acquisitions
DNZ Property Fund increases occupancy rate to 99.2 percent
DNZ boss Duffy cashes in at share price peak with $1.65M sale
DNZ Property lifts first half profit on stable rents, falling expenses
DNZ lifts contracted rentals slightly, extends lease term
DNZ boosts annual earnings 27%, flags dividend rise in 2013
DNZ portfolio's value steady, occupancy & lease terms rise
DNZ sells in Wellington, buys in Auckland