SHORT-TERM PROPERTY FEARS HIT MCGRATH SHARES

Written on the 24 February 2016 by Nick Nichols

SHORT-TERM PROPERTY FEARS HIT MCGRATH SHARES

SHARES in McGrath Limited (ASX:MEA) slumped more than 19 per cent today after the company warned of unexpected headwinds faced by the Australian property market in the short term.

The Sydney-based real estate group has posted an interim net profit of $400,000 for the December half-year, down 82 per cent from a year earlier.

The result included IPO and acquisition costs of $11 million and was delivered on a 33 per cent lift in revenue to $54.3 million.

However, on a pro-forma basis, which McGrath gives a better perspective of the company's underlying performance, net profit was up 13 per cent to $14.7 million while revenue rose 25 per cent to $74.9 million.

While CEO John McGrath (pictured) remains upbeat about the newly listed company's prospects, shareholders took a different view today, with sellers pushing shares down as low as $1.37 from Tuesday's close at $1.70. The shares are now 33 per cent below their $2.10 issue price.

McGrath warns that changes to negative gearing laws, a tightening of lending rules by banking regulator APRA and a slowdown from Chinese buyers have created challenges for the sector in the short term. He also says stock market volatility is another factor taking its toll on the sector.

"The long-term fundamentals of the real estate industry remain attractive, underpinned by historically low interest rates, population growth and the asset class generally," says McGrath.

"However, the short short-term outlook is less certain and this is creating some headwinds leading to challenging market conditions than originally anticipated at the time of our listing."

McGrath says the group, which is making a concerted push into the Melbourne market after establishing a foothold in Queensland in recent years, lifted agent numbers by 59 to 624 during the period, while office numbers are up 11 to 78.

"The results achieved over the first half of the 2016 financial year reflect our ability to deliver on our growth strategy and leverage McGrath's business model and brand which is attractive to high performing agents," says McGrath.

He says the group is on track to deliver on its FY16 prospectus forecasts, including a planned final dividend of 4.5c a share. There is no interim dividend from the latest half-year result.


Author: Nick Nichols

Latest News

HONG KONG FUND INVESTS $212.8 MILLION IN G8 EDUCATION

G8 EDUCATION (ASX: GEM) has secured $212.8 million from Hong Kong-based CFCG Investment Partners to pay down debt and...

MERGER DELIVERS THE FINANCIAL GOODS FOR TERRY WHITE

TERRY White Group has posted a solid half-year net profit of $1.3 million amid a period of major transformation fo...

BLUE SKY APPOINTS TWO NEW INDEPENDENT DIRECTORS

BLUE Sky Alternative Investments (ASX: BLA) has appointed two new independent, non-executive directors to its board: ...

INTEREST IN RETAIL PROPERTY SPIKES AS INTERNATIONAL BRANDS LOOK TO ROLL OUT IN AUSTRALIA

AN influx of international retail brands into Australia over the next five years are expected to push up demand for f...

Related News

WHY EMPLOYEE-OWNED COMPANIES ARE BEATING ASX200 SHARE PRICES

EMPLOYEE-owned companies command a higher share price than their publicly listed peers, reaping a 17 per cent prem...

RISE OF THE MACHINES HAS WORKERS SWEATING

UP TO 3.8 million Australian workers are fearful their job may soon be terminated by a robot, a new survey has shown....

LESS TALK, MORE SMALL BUSINESS ACTION IN 2017

THE future growth and prosperity of Australian SMEs could be undermined if governments lose sight of the sector...

TEST DRIVE A POST GRAD AT BOND

THERE'S only one way to really move your career into the fast lane, says Bond University, and 'test driving...

Contact us

Email News Update Sign Up Contact Details
Subscriptions

PO Box 2087
Brisbane QLD 4001

LoginTell a FriendSign Up to Newsletter