Kiwi Income Property Trust [NZX: KIP], which yesterday posted a 7.8 percent drop in annual profit, was cut to 'hold' from 'buy' by Craigs Investment Partners.
The brokerage revised its forecasts to show earnings and dividends are likely to stall in 2016 as Kiwi Income steps up its tax payments and rental income is crimped as its Unisys House office tower at 56 The Terrace in Wellington is vacated for 21 months as part of a $67 million refurbishment for the Ministry of Social Development.
"The Unisys House redevelopment will result in little or no income over FY15F and FY16F versus $5.4m in FY14," Craigs analyst Chris Byrne said in a note. "This underpins a significant decline in FY16F distributable profit and earnings per unit."
Byrne reduced his 12-month price target for the stock to $1.20 from $1.21 and downgraded his recommendation, noting at $1.16 the units are trading at a 3 percent discount to the target.
Craigs pulled back its expectation for 2016 rental income by 5 percent to $152.2 million, from an estimated $152 million in 2015, and reduced its expectation for 2016 earnings before interest and tax by 12 percent to $133.7 million from an estimated $133.9 million in 2015.
Distributable profit, from which the company pays unitholders, is likely to fall to $70.6 million in 2016 from $74.7 million in 2015, while payments to unitholders will probably remain unchanged at 6.5 cents in 2016, according to Craigs.
Meantime, Kiwi Income's sale of its property at 205 Queen St, Auckland, will reduce the trust's 2015 net rental income by about $7 million, Craigs said.
Auckland-based Kiwi Income said yesterday net income fell to $101.3 million in the year ended March 31, from $109.8 million a year earlier, as costs from exiting its management contract with Commonwealth Bank of Australia outweighed benefits from valuation gains and insurance payments.
Craigs said it had previously expected Kiwi Income to pay no tax in 2015 but now expects a $6 million charge because only $11 million remains of a deferred tax credit from a payment to take its management contract inhouse. The brokerage also increased its normalised tax rate assumption for 2016 to 20 percent from 15 percent, compared with an estimated rate of 8 percent in 2015.
This article is tagged with the following keywords. Find out more about MyNBR Tags
- Kiwi business traveller stranded in San Francisco after United de-planes his wallet and passport
- Budget 2017: What's been announced so far, what's tipped for today
- Steven Joyce has some fat surpluses to play with
- Gentrack lifts first-half profit 46% as new utility deals spur revenue gains
- Pacific Edge tantalisingly close to breakthrough sales, Darling says
Most listened to
- Those pre-budget announcements aren’t as big as they look. Joyce still has lots of fiscal room, says Rob Hosking
- Dairy NZ chief executive Tim Mackle says he's hearing from banks they want farmers to shore up their balance sheet
- Business leaders on Budget 2017: Wendy Kerr hopes Steven Joyce has similar ideas to her about ‘shifting and upscaling the economy in a different way.’
- Pacific Edge CEO David Darling on progress with key US customers
- NBR Radio: best of the week ended May 19, with Grant Walker