SUNLAND GEARING FOR HIGH RISE BOOM
Written on the 20 August 2014 by Nick Nichols
SUNLAND Group Ltd (ASX: SDG) has delivered a healthy rise in profit over 2014 and the company is gearing up for markedly higher earnings in the year ahead.
The Brisbane-based developer of the Q1 and Palazzo Versace hotel on the Gold Coast has posted a net profit of $14.3 million, up 5 per cent on the previous year and better than previous forecasts for a $13-14 million result.
A return to the high rise market is expected to see the bottom-line figure rise to around $20 million in the current year thanks to a surge in 2014 sales that have yet to settle.
Sunland, which has started construction on the 40-level Abian residential tower overlooking the Botanic Gardens in Brisbane’s CBD, managed to lift profit despite a 0.7 per cent fall in revenue to $187.9 million for the 12 months to the end of June.
Sunland managing director Sahba Abedian (pictured) says the company secured 629 sales worth $389 million across its portfolio in 2014, up from 261 sales worth $128.2 million a year earlier.
Settlement volumes also edged higher to 446, worth $178 million, from 401 in FY13 worth $155.9 million.
Abedian says the year ahead will be buoyed by 436 contracts worth $323 million held at the end of June this year, which compares with 292 contracts worth $157 million at the end of FY13.
Sunland’s profit growth has been driven by a return to the high rise market, with Marina Residences at Royal Pines on the Gold Coast featuring strongly in the latest result.
Settlement of contracts in the Abian tower is expected to filter through to the bottom line in FY18 as Sunland continues its move back into the development of landmark projects in both Brisbane and the Gold Coast.
Sunland has achieved 80 per cent pre-sales at Abian which has an end value of $239 million.
The company also has laid plans for the redevelopment of the former ABC studios at Toowong, while on the Gold Coast it is planning a new high rise tower at Labrador and is still working on plans for the redevelopment of Mariner’s Cove at Main Beach.
Abedian says Mariner’s Cove is “a significant project that warrants careful analysis”.
Sunland made eight new site acquisitions in Sydney, Brisbane and the Gold Coast over the past year, worth a total of $82.1 million.
These will provide providing an extra 2250 allotments worth $1.4 billion in future sales, bringing its development pipeline to $3.2 billion to be delivered over the next three to five years.
Abedian says Brisbane will feature strongly as a target market, with $700 million worth of projects planned for the city.
“Queensland is still the largest market for us, including $250 million in assets on the Sunshine Coast and Townsville,” says Abedian.
“We will continue to advance our interests and assess opportunities in the Brisbane market as the year unfolds.”
Sunland relocated its headquarters from the Gold Coast to Brisbane this week as it prepares for what it sees as a new phase of growth.
The company added 3.6c a share to its net value following its full exit from Dubai during the year.
But the bottom line was hit by $8.1 million in legal costs for its failed Supreme Court civil action in Victoria against Matthew Joyce. The matter involved a soured land deal in Dubai.
Abedian says the company has no regrets pursuing the matter, saying: “The principle that governs this organisation is justice.”
Sunland is paying a final dividend of 2c a share, bringing the full-year payout to 4c, with plans to maintain payouts between 40 and 50 per cent of net operating earnings.
The company is poised to launch nine new projects worth $1.38 billion this financial year as it ramps up development activities in a rising market.
“During the past five years, Sunland has strategically positioned itself with site acquisitions that will provide sustainable medium to long-term earnings profile for the group, the benefit of which will flow to our shareholders in the ensuing years,” says Abedian.
“This demonstrates the enduring value of the group’s counter-cyclical approach to acquiring strategic sites at opportunistic points in the market cycles.
“Sunland’s return to multi-storey developments is expected to greatly enhance earnings per share in the short to medium-term.
“Similarly, the group’s residential housing and urban development segment is forecast to perform in line with market conditions.
“While the prevailing economic environment presents ongoing challenges for the development industry, the directors believe Sunland’s strong balance sheet, access to capital and cash flow forecast provide a stable platform from which to improve profitability and deliver sustainable shareholder returns.”
Sunland has $14.7 million in cash and $112.8 million in undrawn credit lines, and gearing of 24 per cent of equity.
Author: Nick Nichols