Are Dexus (ASX:DXS) and Mirvac (ASX:MGR) results a property horror show or not?

Nick Sundich Nick Sundich, August 16, 2023

It has been a horror reporting season for property stocks and Dexus (ASX:DXS) and Mirvac (ASX:MGR) have been no exception.


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Dexus (ASX:DXS) swings from a $1.6bn profit to a $752.7m loss

After recording a $1.6bn profit in FY22, Dexus recorded a $752.7m loss in FY23. The loss was mostly due to fair valuation losses which amounted to $1.2bn when all was said and done. This was because it has substantial exposure to the office sector, both as a landlord and a manager of property funds with exposure to the sector (among others).

Dexus’ Funds from Operations only declined 2.5% and came in at $738.5m. It paid 51.6c in distributions, a figure that is a yield of over 6% but is down 3% from last year. Dexus anticipates a further cut next year, having guided to distributions of ~48c per share.


Mirvac’s $906m profit falls to a $165m loss

It was a similar story over at Mirvac that exposure to offices and residential property developments. This company recorded a $906m profit in FY22 but made a $165m loss this year. Again, this was due to devaluations of its properties because its operating profit was only 3% down from the year before, coming in at $580m.

Statutory revenues fell by almost one-third and the company warned that it was a challenging economic backdrop. It promised to moderate its exposure to the office sector and increase exposure to the industrial and living sectors. However, it remains to be seen if it can maintain the level of settlements amidst high interest rates and supply chain issues hindering the construction sector.


Even Vicinity can’t escape

Rounding out today’s property stocks to report was Vicinity Centres (ASX:VCX), a company that owns shopping centres. It recorded a statutory profit of $271.5m, but this was down from $1.2bn due to portfolio write downs.

Even though its distributions were above guidance, the company warned the macroeconomic outlook was uncertain and forecasted FFO to be slightly down next year (from 15c per security in FY23 to 14.1-14.5c in FY24).


A lot of the bad news was priced in already

Despite the big drops in earnings, we believe a lot of the pain was priced in already. A lot of the bad news has been previously communicated by the companies. This explains why property stock share prices have been holding up relatively well post earnings. We’re actually starting to like the Property sector, given that we expect to see interest rate cuts come through early in 2024. And many of these stocks should be doing better as COVID is becoming a distant memory.


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