Ageing Australian Population a Positive for Aveo
Investing smartly into growing markets can present great opportunities, and backing demographic trends can be a good way to do this. Taking advantage of Australian’s ageing demographic is Aveo Group (ASX: AOG.) Aveo is the owner, operator and manager of retirement communities across Australia, currently housing some 13,000 residents in 89 retirement villages Australia wide. Aveo also manages and develops a property portfolio that encompasses retirement, residential, commercial, industrial and mixed-use property assets. Unlike other operators in the aged care sector who generate their revenue via care and support services, Aveo generates most of its income through property management fees.
The target market for Aveo is an older demographic, namely Australians 75 and older. With the number of Australian’s turning 75 set to increase as the baby boomers age, Aveo is well positioned to take advantage of the growth in demand for retirement living. In addition, retirement unit prices are expected to record solid growth over the next five years, Aveo is set to benefit from higher selling prices on existing units and also from units under development. In the recent reporting season, Aveo reported an 82% rise in half-year profit, helped by the acquisition on Freedom Aged Care and the demand for new developments. Net profit was $121.2 million, up from $66.5 million a year earlier.
Our research analysts believe Aveo is attractively prices, with the current stock price of $3.15 at a 10% discount to their current fair value price of $3.50 After the recent report, broker Morgan Stanley has increased their target price on the stock to $4.20 per share. The stock only offers a modest dividend yield of 2.53%, the main reason to add this stock to your portfolio is for future capital growth potential. Investors can be fairly confident with the company’s growth outlook as earnings per shares are expected to grow at around 7.5% over the next couple of years.
I have attached our research departments recent report on the stock, and a brief company profile for you to have a look at. If you’re interested in adding a holding in Aveo Group to your portfolio, please give us a call any time on 07 5520 8788 to discuss.