Company Reports

Just over half of Ingenia Communities’ midcycle EBITDA is from land-lease property sales and rent. Ingenia collects rent on about 6,000 land-lease sites, across 70 land-lease and holiday park communities on Australia’s east coast. The firm’s strategy is to build higher-end communities primarily in Australia’s coastal and outer metropolitan areas. Following significant land acquisitions over the past few years, Ingenia has a pipeline of about 6,000 new dwellings, and 18 sites currently in development or planning. All are targeting over-55s and leveraged to the thematic of the aging population and the rising cost of housing.

We raise our fair value estimate for no-moat Ingenia by 10% to AUD 4.30 with half-year earnings, mainly driven by higher assumed rental growth. Ingenia achieved impressive 9% rent increases on its lifestyle sites over the half. We still expect a fade, assuming rent growth moderates to 2.3% by the end of our 10-year discrete forecast period. But strong current rental growth forms a higher base for rental income than can be maintained, given Ingenia’s relative affordability versus traditional housing. This accounts for the vast majority of our valuation increase.

The federal government’s migration review was released on Dec. 11 and it suggests high population growth remains the status quo. The review tinkers with various visa rules, but contains no major reduction in migrant numbers, suggesting high migration will persist, relative to precoronavirus levels and versus other developed countries.

Just over half of Ingenia Communities’ midcycle EBITDA is from land-lease property sales and rent. Ingenia collects rent on about 6,000 land-lease sites, across 70 land-lease and holiday park communities on Australia’s east coast. The firm’s strategy is to build higher-end communities primarily in Australia’s coastal and outer metropolitan areas. Following significant land acquisitions over the past few years, Ingenia has a pipeline of about 6,000 new dwellings, and 18 sites currently in development or planning. All are targeting over-55s and leveraged to the thematic of the aging population and the rising cost of housing.

We initiate research coverage of Ingenia Communities, with a fair value estimate of AUD 3.90 per security and a no-moat rating. Ingenia is an Australian real estate investment trust with a property portfolio capitalizing on tourism, retirement, and low-cost housing needs. The largest and fastest-growing source of income is the firm’s land-lease communities targeted at the over-55s population. In a land lease, the resident owns their own premanufactured home and pays rent for the land their home occupies. It appeals to customers who have most of their net wealth tied up in their homes and depend on downsizing to free up wealth to fund their retirement years.

Just over half of Ingenia’s midcycle EBITDA is from land-lease property sales and rent. Ingenia collects rent on about 6,000 land-lease sites, across 70 land-lease and holiday park communities on Australia’s east coast. The firm’s strategy is to build higher-end communities primarily in Australia’s coastal and outer metropolitan areas. Following significant land acquisitions over the past few years, Ingenia has a pipeline of about 6,000 new dwellings, and 18 sites currently in development or planning. All are targeting the over-55s population and leveraged to the positive thematic of the aging population and the rising cost of housing.