Ingenia shares lift as Morningstar boosts its valuation
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More news: Ingenia Communities Group shares advanced on the ASX after Morningstar increased its fair value estimate on the holiday parks and retirement villages owner by 15% to $5.30.
Ingenia shares were up 1.2% to $5.08 by 11:35am AEST.
Morningstar lifts Ingenia valuation by 15%
The news: Morningstar hiked its valuation on Ingenia Communities Group after revising its cost of equity assumptions for Australian land leases.
The numbers: Morningstar raised its fair value estimate for Ingenia by 15% from $4.60 to $5.30. The stock last closed at $5.02 having added nearly 25% in the last 12 months.
After revising its cost of equity assumptions for its Australian land lease coverage, Morningstar applied a 6.8% weighted average cost of capital on Ingenia, down from 7.7% previously. It also lifted its margin assumptions for Ingenia's rental business, now 58% at the midcycle from 55% previously.
Morningstar estimates Ingenia will see an operating income compound annual growth rate of 11% over the decade to FY34, driven by improved sales prices, less spending on sales and marketing, a bigger pool of rental income, and cost benefits from a greater volume of new houses constructed.
The context: Morningstar analyst Esther Holloway said that holiday parks and retirement villages owner Ingenia is undergoing "rapid growth", including almost doubling rent collection sites in its portfolio over the three years to December 2024.
Meanwhile, its development pipeline of around 5,000 land-lease properties means its land lease property portfolio is likely to double in volume over the next decade, Holloway noted.
What they said: "With Ingenia's primary market being retirees, it benefits from an aging population and a rising cost of housing," Holloway said.
"Additional assets in low-cost rental communities and tourist parks provide steady revenue streams and the potential to convert to land leases in the future.
"A recent strategic pivot toward higher-end coastal and regional communities provides earnings upside from higher-priced property sales."
The source: Morningstar research
