Ample Room For Growth For Ingenia Communities | KOSEC

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Ample Room For Growth For Ingenia Communities

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As the owner of more than sixty communities, Ingenia Communities has indicated the possibility of further expansion plans. The group’s 80 per cent surge in net profit after tax for the six months ending 31 December 2019 to that of $23.6 million was attributed to the massive devaluation of investment properties from the year before. Presently, forecasted full-year earnings before interest and tax are expected to come in at the lower end of the 15- 20 per cent range.

The guidance further accounts for the effects of the bushfires which have destroyed several of Ingenia’s tourism parks on the south coast of NSW. More notably, business across three of its parks at Lake Conjola, Bermagui and Broulee was severely affected as residents and tourists were evacuated from the respective regions. Specifically, the tourism park and accommodation occupied by retirees at Lake Conjola was damaged by a fire that broke out on New Year’s Eve.

As a result, the group sees huge uncertainty surrounding the settlement of approximately twenty properties in Lake Conjola. Though this investment may be faced with short-term difficulties, Ingenia maintains the view that Lake Conjola presents long-term growth. From a broader perspective, the population of people turning 65 years and above will grow to that of 5 million individuals by 2026 – further translating into and addition of 130,000 seniors annually. Thus, Ingenia stands to benefit as the group develops affordable accommodation for this target audience.

In order to maintain the current penetration rate of 2.1 per cent of the over 65s audience, the industry as a whole would, therefore, need to provide 2,700 new dwellings annually. Yet, there exists room for improvements as even after including Ingenia’s closest competitor, ASX-listed Victorian operator Lifestyle Communities, the current supply of 2000 new dwellings a year still fall short of demand.

Relative to Lifestyle Communities who witnessed a dip in settlements from 186 to 109, Ingenia recorded a significant 22 per cent increase in settlement of new homes to that of 140. Specifically, settlement revenue plummeted to $40 million in the six months from $63 million from the prior corresponding period. Nevertheless, Lifestyle Communities sought to reassure investors that the firm remains on track to achieve targets despite the 37 per cent drop in revenue in the first half of 2020.

Ultimately, it is apparent that Ingenia is thriving in the right sector. Goldman Sachs was of the view that Australian low-cost lifestyle villages or manufactured housing estates are the right places that will yield higher-returning assets for commercial investors in a low-interest environment. Additionally, Ingenia’s diversified portfolio will continue to meet the needs of a generation of downsizing babyboomers, address the issue of housing affordability and ease the worries of those who lack retirement savings. Collectively, these factors represent tremendous growth for Ingenia to scale its business to greater heights.

By Caroline Wong 

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Caroline Wong

Caroline Wong is a Research Analyst at KOSEC – Kodari Securities. She writes on markets and focuses on ASX Top 300 companies. Email Caroline at c.wong@kosec.com.au.

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