Ingenia Communities (ASX: INA) found itself on the top of leaderboard going to the close on Tuesday following a major upgrade to the retirement homes investor/developer’s earnings.
The affordable housing developer's share price was up 15% to $5.20 on the back of news it now expects its FY25 earnings to rise 20-23% to $162-$65 million, up from the previously expected 10-15% growth of $148-$155 million.
Underlying earnings per share (EPS) is also expected to come in between 29-30 cents, up almost a fifth (at the midpoint) of the previous forecast.
CEO John Carfi attributes the improved earnings update to returns from the group’s development activity and operational simplification which is driving efficiency and returns.
Also contributing to the improved outlook, added Carfi, were the Group’s 1-, 3- and 5-year plan - already yielding results – plus a lower interest cost due to lower drawn debt and an increase in the Group’s hedged debt position.
“Changes to the Group’s operating model aimed at improving productivity have delivered ongoing cost benefits with savings exceeding original expectations as the group moves into the second half,” said Carfi.
“The development business is gaining momentum and benefitting from a clear focus on improving returns and greater financial discipline with the margin on home sales maintained despite cost pressures, and new projects on track to contribute in the second half.”
During the first half of the year 258 homes were settled.
The current sales pipeline is expected to set the company up to deliver a more consistent settlements profile, albeit with a slight skew to the second half and increasing settlements from the group's ongoing joint venture activities.
Meanwhile, the group’s residential communities and holiday parks continue to provide stable and growing returns, with high occupancy maintained across its communities and ongoing strength in forward bookings.
With a market cap of around $2.1 billion, Ingenia sits fractionally outside the ASX200. Over the past 12 months the share price is up around 14%.
Citi, Ord Minnett and UBS have a consensus target price of $5.94 on the stock; watch out for broker upgrades in the days that follow yesterday’s strong announcement.
