Augusta Capital Limited (NZSE:AUG): Time To Invest In Real Estate?
Augusta Capital Limited (NZSE:AUG) is a NZDNZ$90.15M real estate investment trust (REIT), which is a collective vehicle for investing in real estate that began in the US and has since been adopted worldwide as an investment asset. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the NZ stock market as a whole. Today, I’ll take you through the real estate sector outlook, and also determine whether AUG is a laggard or leader relative to its real estate sector peers. Check out our latest analysis for Augusta Capital
What’s the catalyst for AUG’s sector growth?
Concerns surrounding rate increases and treasury yield movements have made investors dubious around investing in REIT stocks. This is because REITs tend to be dependent on debt funding. They are also considered as bond investment alternatives due to their high and stable dividend payments. In the previous year, the industry endured negative growth of -18.77%, underperforming the NZ market growth of 4.51%. AUG lags the pack with its negative growth rate of -26.66% over the past year, which indicates the company will be growing at a slower pace than its REIT peers. However, the future seems brighter, as analysts expect an industry-beating , albeit negative, growth rate of -32.49% in the upcoming year.
Is AUG and the sector relatively cheap?
The REIT sector’s PE is currently hovering around 9x, in-line with the NZ stock market PE of 14x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 12.12% on equities compared to the market’s 12.65%. On the stock-level, AUG is trading at a PE ratio of 9x, which is relatively in-line with the average REIT stock. In terms of returns, AUG generated 11.86% in the past year, in-line with its industry average.
What this means for you:
Are you a shareholder? AUG’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this high growth prospect is most likely factored into the share price, given AUG is trading in-line with its peers. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto AUG as part of your portfolio. However, if you’re relatively concentrated in REIT, you may want to value AUG based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If AUG has been on your watchlist for a while, now may be the time to enter into the stock. If you like its growth prospects, you’ll be paying a fair value for the company, given that it is trading relatively in-line with its peers. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time.
For a deeper dive into Augusta Capital’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other real estate stocks instead? Use our free playform to see my list of over 100 other real estate companies trading on the market.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
