Bell Potter retains a "buy" recommendation on AVJennings and a...

Bell Potter retains a "buy" recommendation on AVJennings and a price target of 88¢. "A significant portion of AVJ's current developments are now entering the stages in their product life cycle when they are at their earnings and cashflow peak and this dynamic is likely to remain for the next two to three years. The operating leverage within the business at this stage of the cycle is its strongest, indicated by the 80 per cent in earnings upgrades that have flowed to AVJ in the past 12 months. Importantly the next round of investment to support earnings in FY17-18e has been made, with recent acquisitions in Williamstown and Wollert (VIC), Warnervale (NSW), Catalina (NZ) and St Clair (SA). AVJ continues to trade at a material 16 per cent discount to net working capital and a 20 per cent discount to NTA. This is despite clear signals that earnings are now hitting a sweet spot and that there have been favourable property value revaluations for the past two years. With a solid pipeline of activity on existing developments, the near term outlook remains encouraging for AVJ."

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