With good visibility, Mirvac reaffirms full year earnings and profit guidance following Stockland downgrade

Listed property developer Mirvac has reaffirmed its profit and earnings guidance for the 2012 financial year following the downgrade earlier today by Stockland. 

Mirvac is forecasting operating profit of $360 million to $364 million, operating earnings per share (EPS) guidance of 10.5¢ to 10.6¢ per stapled security and distribution guidance of 8.2¢ to 8.4¢ per stapled security. 

“Mirvac is confident of delivering on our previously stated 2012 financial year forecast group operating guidance,” Mirvac managing director Nick Collishaw said after the market closed today. 

“Our development division forecast includes our target of 1,800 residential lots, which has been prepared in line with current market conditions. 

“Our stated strategy to focus on the office investment sector, and our apartment and master-planned community projects on developing the right product, at the right price point, in the right location is proving effective.” 

“As highlighted in our 2012 financial year half-year result, 68.5% of our second half of 2012 forecast development operating earnings before interest and tax (EBIT) is already secured from pre-sold contracts.” 

“This figure provides us with good visibility for the full year,” says Collishaw, who expects to provide third-quarter 2012 financial year update to the market on May 1. 

Stockland shares fell 4.4% today (14¢) to $3 while Mirvac shares were down marginally to $1.185 from $1.20 at the start of trading. 

According to Morningstar's head of property research Tony Sherlock, while there is scope for further softness in the sector, ''the bigger question is how long will this last, particularly given the RBA's reluctance to cut rates with inflation and unemployment both apparently in check''. 

''While the remaining parts of Stockland appear sound, we are not forecasting a material recovery in the residential division for at least 18 months,'' he says. 

Fairfax media reported that in a morning note to clients Macquarie Equities said the increase in mortgage rates in February had a negative impact on the residential market. 

''This has been a key factor underpinning our ongoing caution on the performance of the residential developers,'' the note says. 

''Stockland's revised guidance 'assumes sales will continue to be slow for the balance of the financial year' although we continue to highlight that soft market conditions can also adversely impact the results from the retirement business which, at this stage, Stockland have said is performing in line with expectations.''