Delphi...you persist in calling AOG a property developer...it was, but now 97% of its assets are in retirement/aged care. If we assume it is a property developer, can you name me one other developer which has a contractual, guaranteed locked in stream of revenue and cash over the next 15 years and that's assuming the current average resident who is 83 passes on or moves out before they turn 98!
Indeed, in addition to development stock, AOG can almost bank on 10% to 12% of existing units (approx 11,500 of them) turning over each year. Last year was a shocker at around 8% because of the adverse Four Corners publicity. What other property developer or REIT for that matter can front their bankers with such certainty?
AOG isn't just dependant upon the economy to make profits and cash ...demographics will do that as well. The only thing in dispute is the quantum of profits/cash which is economy related.
In a sense, what is different between the retirement industry, structured as AOG is, and a REIT? A number of analysts treat them as such. AOG actually use the traditional REIT terminologies of FFO (Funds from Operations) and AFFO etc. They certainly see themselves as a quasi REIT and are deliberately setting up the dividend payout to offer such certainty.
As to capitalising of interest...REITS don't do this? The huge amount of capitalised interest has everything to do with a massive FY18 development pipeline and a large refurbishment program to boot. It has to be a level playing field here to make comparisons.
I will rely upon the audited figuers which (a) have sanctioned the capitalisation of interest and (b) which quote official ICR figures on page A51 as 5.8x Presumably they are following the international accounting standards and you should too.
I note that you don't comment whatsoever on my debt to equity argument, you just sweep it under the floor and pull another ratio out to suit your argument. In this case ICR. At 5.8x AOG isn't that far away from the global industry median ICR of 6.5x
And whilst you state that "Most companies will have a ICR covenant of a minimum 3x", note 16 in the FY18 results clearly says otherwise, >1.5x
Sure ICR could be better (has been better - last year 7.8x) and will be better when it digests the massive stock overhang. Right now it is a python that swallowed the pig, time is required and every sale wil reduce the debt.
As to "asset value been safe", well what can I say? We are talking about bricks and mortar tenanted by elderly, responsible people.
Enough. I will exit this matter now.
AOG Price at posting:
$1.56 Sentiment: Hold Disclosure: Held
