Aveo will be hit by softening residential market: Macquarie

Need some views from the other side as well,  although reading at discount  on NTA Aveo is not just shining as it shows in the FY2018 result.


https://www.copyright link/real-est...-residential-market-macquarie-20180704-h128hd

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Retirement village player Aveo could be hit by the slowdown in the residential market as new residents take longer to sell their own homes and move in, according to Macquarie.
That analysis prompted Macquarie Research's Matt Johnston to downgrade the stock from an outperform to neutral this week.
The analyst said it was "difficult to see how Aveo is immune to a softening residential property market".
He cited residential headwinds in such limited mortgage relief, slower credit growth and falling auction clearances and volumes which would put pressure on housing growth.  

"This likely means less retirees transitioning from home ownership to village retirement," the analyst wrote in a note this week.

Other warning bells for Aveo included the fact its completions are outpacing settlements, according to Macquarie.
The 2018 financial year saw almost double the amount of completions than the previous year, albeit with limited settlements, the analyst noted.
"In addition, occupancy in the established business is falling, placing pressure on retirement cash flows as non-core asset sales reach completion," he wrote.
Aveo, which was forced to reform its offers in response to damaging allegations about its business practices and treatment of residents, is not the only accommodation player to be potentially affected by the softening residential market.

In May, budget Gateway Lifestyle issued a profit downgrade because it is waiting longer for its incoming buyers to sell their existing dwellings and settle on their new homes.
One month later cashed-up suitors Hometown America and Brookfield seized on that opportunity,
Majority controlled by Malaysian conglomerate Mulpha and led by Geoff Grady, Aveo is also defending a class action accusing it of unconscionable conduct and engaging in misleading or deceptive conduct with its residents.
Macquarie noted that "negative media attention" in the 2018 first half impacted occupancy at Aveo.

The Macquarie note warned Aveo's occupancy was to likely slip in 2018 second half as well and it would have to "accelerate established business sales above normalised levels" to bring occupancy back in line.
"We see this as a challenge assuming a deflated property market and lower sales volumes will likely create additional macro headwinds for transactions," Mr Johnston wrote.