Ann: Full Year Results 2017 Presentation, page-15

Bought in at 61c early May for the below 3 reasons with the understanding that the price was unlikely to move much higher quickly :

* Dividend yield & PE
* Large discount to Net Assets Value
* Product mix and where it sits in the overall market

My view was that including dividends this name could return 10 per year for 2-3 years with very little risk. We have had over a 30% appreciation in the SP since then which is what I was expecting to return over 3 year period. As a result I have had to reevaluate my position.

I have a negative sentiment on the property market especially in Sydney & Melb so am fully aware of the risks associated with the sector. My view on AVJ however is that whatever carnage is going to eventuate (and it most certainly will) will not adversely affect the metrics i care about.

All their assets are reported at cost so there is a very large capital gain on the portfolio that is not being reported. There is a bunch of hidden value there, and the fact it may never be fully realised due to constantly having to hold stock in this way is fine with me. The upside of this is that when property inevitably starts to fall out NTA wont be affected as most of what we own was ought at much lower valuations.

In addition to that, the segment of the market that AVJ operates in is not one that will be affected greatly by what is to come. We build houses at a price point significantly lower than the average prices in every state. One could take a position that the impending doom will bring more buyers into the price point we operate in. I take a more conservative view, that the doom will affect the whole market and we wont see a gain, however it is very unlikely we see a loss.

As a result I believe that AVJ can maintain and even grown earnings over the next 2-3 years even as the property market slows down.

I am not a buyer at current levels, primarily because the name has the maximum allowable allocation in the portfolio, however at a PE of 8 and a div yield at 6.37% I can not justify selling either. I remain a holder with my original views in tact, despite that great run up over the last 3 months.