Daily ShareChat; DNZ

By Jenny Ruth

Wednesday 20th October 2010 1 Comment

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.

Comments from our readers

On 21 October 2010 at 3:32 pm Jack said:

I also note that DNZ and others are trying to buy back shares from Holders of up to 25,000 shares and describing them as small holders( read elderly Unsavy). The Stockbrokers I know are always keen to trade even 10,000 Shares in any company. They see much more upside I think.