Yes it is tempting in a SMSF - 18.5c ff dividends on a BUY price of $2.17 is an effective 12.18%. Even with the magic of compound interest it will take you 9+ years to get your humble bank deposit book to generate that.
Presuming VLW does $40m NPAT in FY19 after the dividend payment of $23m, the NTA at June 30, 2019 will be $2.55.
Effectively Morgans has lopped $58m off the presumed value of VLW because a government department in Victoria is taking longer to rubber stamp a set of documents - and valuing the company at less than its NTA! And FY18 results will be $2m higher than previously thought because they are dragging forward a sale which was slotted for FY19.
MY DCF calcs suggest that even at a very modest 2% growth over the next 10 years - to match CPI - and a discount rate of 12% applied to eps of just 28c values the company at $2.48 (the same as Morgans).
But reality is that eps for FY18 will be 33.8c and 31.5c for FY19.
No, I think Morgans are way too harsh in their valuation assumptions.
With an assumed NTA of $2.55 at June 30, 2019, VLW can weather a wobble in RE prices. Besides by 30/6/2019 they will have retired quite some debt with property settlements and then have a decent war chest to pick up raw land at depressed prices. And so the cycle continues.
VLW Price at posting:
$2.15 Sentiment: Hold Disclosure: Held
