Sunland to continue buy back scheme

Written on the 2 December 2010

SEP 2010

Listed property developer Sunland Group has posted a net profit of $18.3 million achieving an above guidance result for FY10.

It represents a $163.4 million improvement on the previous financial year and surpassed the group’s initial profit guidance of $15 million and revised profit guidance of $17-18 million in March.

Sunland managing director Sahba Abedian, says the strength of the performance demonstrated the group’s fundamental long-term strategy enabling it to return to profit. He says strict capital management initiatives were key to re-aligning the business during a year of challenging market conditions.

“Our focus now is on capital management following the two buyback initiatives of 73 million shares that will give us a sustainable and sound strategy moving forward,” says Abedian.

“We have increased our earnings per share by 30 per cent which delivers medium to long term results for our shareholders. We were in a very strong position heading into the GFC and we need to maintain that strong discipline.”

Two on market share buy-back programs were launched for $58 million (average 80 cents a share) resulting in a 23 per cent reduction of issued shares and enhancement of the group’s earnings per share to 7.4 cents.

The company will launch a third tranche of shares in a buy back at its AGM on October 15 at its Palazzo Versace hotel on the Gold Coast.

The group’s net tangible assets have also increased from $1.20 to $1.39 representing an increase of 16 per cent following the conclusion of the most recent share buy-back.

Residential Focus

Sunland released seven new residential housing and urban developments in FY10 comprising 264 products with an end value of $201.8 million. During 2009-10 it achieved 857 sales (representing a 6 per cent increase on the previous year) and 661 settlements.

The group is also anticipating a release of a further six new projects in the year ahead with a total of 942 products with an estimated end value of $505.7 million.

“Our portfolio is predominately residential housing that appeals to second home buyers. We have been very strategic in a sense that the new sites are in premium locations with a good cross section of products,” says Abedian.

Acquisitions

Sunland has secured three prestigious golf course projects with Sanctuary Cove in a JV with its owner Mulpha; Royal Pines and the Glades after it acquired product from Thakral.

“We are achieving well above the average price points of $1.5 million at Sanctuary Cove,” says Abedian.

The company also acquired the Carrington residential high rise from Devine overlooking the Botanical Gardens in Brisbane.

“Key to the success of these residential releases is the design and premium location of our projects and the alignment of our portfolio within the strongest performing consumer segments. Furthermore, acquisitions will remain focussed on Victoria and South East QLD,” says Abedian.

Sunland’s Australian pipeline comprises 3647 products with an end value of $1.46 billion.

“During 2009-10 we replenished our Australian residential portfolio with new site acquisitions totalling $70.4 million,” says Abedian.

“Key acquisitions within our residential housing portfolio include the balance of the residential land at The Glades golf course community for $23.4 million and land at Pacific Pines, acquired for $4 million on the Gold Coast.

“Together, these two projects are earmarked for residential developments with a combined total end value of $144 million and 305 dwellings. In Victoria the Group also contracted to acquire three parcels of land ($18 million) adjoining our Chancellor Estate, comprising 188 residential homes with an end value of $82.7 million.

“Sunland’s portfolio is primarily equity funded and this has enabled the group to replenish the portfolio through strategic acquisitions that will contribute to earnings over the next few years.”

Difficulty in Dubai

Abedian concedes further volatility in Dubai for the group with market conditions remaining difficult.

Net tangible assets in Dubai represent 56 cents per share of the consolidated group position which is a reduction of 3cents per share from the previous corresponding
year. Assets include working capital of $6.6 million (2.7 cents per share).

“Sunland’s development projects in Dubai are non-recourse to Sunland Group Limited and our Australian operations, with funding risks limited to these projects,” says Abedian.

Sunland is also pursuing the purchasers of non-performing contracts on NUR, Palazzo Versace Dubai and D1.

Legal action has also commenced in both Australia and Dubai regarding the group’s dispute relating to the purchase of the Dubai Waterfront site.

Sunland has forecast FY11 net profit of $20 million.

“Sunland enter the new financial year with a strong balance sheet, significant forecasted cash flows and continued conservative gearing levels,” says Abedian.


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