Argosy Property – retain hold-rating

18 May 2023

Argosy shares had a muted respond after its result was in-line with expectations, as higher interest rate costs being the major headwind. Their net tangible asset per share fell from $1.74 down to $1.58 which was mostly expected, after experiencing a $146.6m devaluation of its property portfolio. For the 12 months to 31 March, Argosy reported net property income of $112.8m for the period, up $7.6m or 7.3% compared with the prior comparable period. Net property income was bolstered by solid like for like rental growth, the contribution from 100 Maui Street and development income. Looking ahead Argosy expects 2024 full-year dividend to come in at 6.65 cents per share. We remain HOLD rated, as we see risk of a dividend cut over the next year or two as interest costs rise, while seeing limited rental growth over the near-term. We would be buyers at lower levels that provide better risk-adjusted dividend return.

New Zealand

The New Zealand market (NZX50) was flat yesterday.

Serko shares were the best performing up 29.1% after the online business travel provider reported at +154% increase in revenue to $48m, helped by its partnership with Booking.com as business travel picked up strongly.

DGL is trading at a discount to its historical average P/E (~20%). No view but watching with interest. Outspoken CEO Simon Henry is an astute operator.

US

Little news flow. Debt ceiling remains in focus, but we think it’s a non-issue and more of a display of political theatre (remarkable that one of the best producers of companies in the world also has one of the worst political systems). Upgrading out outlook on Netflix as more advertisers clamour to be part of the “ad supported” tier – it isn’t a buy, but we think the read-through looks good for the other streamers – DIS WBD and PARA in order of preference.

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