Mirvac touted as possible takeover scenario

A heavily discounted share price makes property developer Mirvac a likely target for a takeover bid, according to John Kim, a property analyst at Asian investment firm CLSA.

Kim says takeover bids could come from private equity, an Asian developer or property group Lend Lease.

According Kim, Mirvac’s securities are currently trading at a 20.9% discount to its net tangible assets, compared with a more modest 4.7% discount for competitor Stockland.

Furthermore, Mirvac offers stronger earnings growth potential than Stockland, with three-year earnings per unit compound growth rate of 5.9%, compared with 1% for Stockland.

Morgan Stanley analysts come to a similar conclusion about Mirvac’ share price, discounting it at 19.6% to net tangible assets with Stockland at a discount of 5.5%, according to it June property market research report.

However, Morgan Stanley forecasts Stockland’s EPS yield for the next 12 months at 9.7%, compared with 9% for Mirvac.

News of a possible takeover comes soon after Mirvac wrote off $80 million on its balance sheet as a result of flood damage to its Tennyson Reach residential development on the Brisbane River.

Kim says Mirvac, which holds 46% of its assets in offices, will benefit from a recovery in the office market over the next three years when vacancies drop to 3% in Melbourne and 4% in Sydney by 2014, The Australian reports.

He also expects Mirvac to continue to benefit from strong demand for central city apartments, citing the recent brisk sale of units its ERA project in Chatswood, North Sydney.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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