Company: Abacus Property Group (ASX: ABP)
Current Share Price: $2.86
Analysts Fair Value Price: $3.50
Upside to Fair Value Price: $0.64
Abacus Property Group is a diversified property firm with assets spread among retail, office, warehouse, self-storage, and residential development. It derives the bulk of its rental income from mid-tier assets and these receipts form the basis of the firm’s annual dividend.
The fact that the majority of Abacus’ capital is allocated to asset classes with moderate to low entry barriers is the reason we give the firm a no-moat rating. The firm is also an optimistic investor, with a long history of buying difficult assets at deep discounts to their improved value. There are signs the Sydney residential development cycle is slowing, but we think the firm has been overly sold down in response and is attractively priced at current levels. Likely catalysts to close the gap between share price and fair value are evidence of resilience in Sydney home prices and further progress on rezoning of the firm’s large residential development site in the Sydney suburb of Camellia.
The stock has recently pulled back over 15% from speculation about future interest rate rises and an overheated property market in Sydney. As seen in the chart below the stock has pulled back to the support level around $2.80. Analysts see the pullback in the share price as presenting an opportunity to buy the stock.
The stock also offers a yield of 5.94% at current levels (unfranked) Abacus represents a good opportunity to diversify your portfolio away from the traditional yield stocks.
Sources: Morningstar research, IRESS
If you would like to discuss the opportunity to enter a holding in Abacus Property Group, please give us a call on 07 5520 8788.