Is Now The Time To Bet On The Real Estate Sector And Garda Diversified Property Fund (ASX:GDF)?
Garda Diversified Property Fund (ASX:GDF) is a AUDA$131.98M 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 Australian stock market as a whole. Today, I’ll take you through the real estate sector outlook, and also determine whether GDF is a laggard or leader relative to its real estate sector peers. View our latest analysis for Garda Diversified Property Fund
What’s the catalyst for GDF’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. Over the past year, the industry saw growth in the teens, beating the Australian market growth of -4.59%. GDF lags the pack with its lower growth rate of 2.76% over the past year, which indicates the company will be growing at a slower pace than its REIT peers. As the company trails the rest of the industry in terms of growth, GDF may also be a cheaper stock relative to its peers.
Is GDF and the sector relatively cheap?
The REIT sector’s PE is currently hovering around 7x, lower than the rest of the Australian stock market PE of 16x. This illustrates a somewhat under-priced sector compared to the rest of the market. Furthermore, the industry returned a higher 15.74% compared to the market’s 11.92%, making it a potentially attractive sector. On the stock-level, GDF is trading at a PE ratio of 6x, which is relatively in-line with the average REIT stock. In terms of returns, GDF generated 16.64% in the past year, in-line with its industry average.
What this means for you:
Are you a shareholder? GDF has been a REIT industry laggard in the past year. If your initial investment thesis is around the growth prospects of GDF, there are other REIT companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how GDF fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If GDF has been on your watchlist for a while, now may be the best time to enter into the stock. It delivered lower earnings growth compared to its REIT peers in the near term, and it is also trading at a PE in-line with these companies. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the real estate sector.
For a deeper dive into Garda Diversified Property Fund’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.
