Eco Investor September 2015

Core Securities

More Growth from Ingenia

Ingenia Communities Group has acquired another holiday and accommodation park, this time on the NSW south coast where it will form the basis for a new Southern NSW cluster of parks. The Group also announced an increase of $20.3 million or 2.3 cents per security in the value of its property portfolio.

Ingenia has been steadily adding to its portfolio of holiday and low cost accommodation parks, and this seems to be reflected in its security price which has trended upwards since March after trending down for 18 months.

The latest acquisition, Conjola Lakeside at Lake Conjola, is said to be a premium coastal park with stable cash flows and significant potential for further development. It is a long established mixed use park on a 21 hectare lake-front location. It is surrounded by National Park and about three hours from Sydney.


Conjola Lakeside Holiday Park, NSW.

There are currently 287 annual sites and 81 tourism cabins and sites. The Park has a range of what are said to be "superior facilities including a water park, tennis courts, boating facilities, cafe, nine hole golf course, children's playgrounds and barbeque areas."

The acquisition price is $24 million. The acquisition is earnings accretive with an initial or passing yield of over 8 per cent on the full purchase price including the vacant land. The forecast unlevered internal rate of return is 12 to 15 per cent.

Over half the Park's income is from high occupancy annual sites that provide low cost and secure cashflows. Residents rent the land for around $6,500 per annum and on this they to put their own holiday home or caravan.

Just over 50 per cent of the site is developed and there are other DA approved sites and additional vacant land. Ingenia said land is available for 14 new annual and tourist sites. There are approvals for a further 75 sites on vacant land, and utilizing more vacant land could bring this to 100 new homes.

Chief executive Simon Owen said a Southern NSW cluster is attractive as the region is close to Sydney and Canberra, and has an ageing population and firm median house prices. The market is also scaleable in a way similar to the Hunter/ Lake Macquarie region north of Sydney where Ingenia owns eight parks.

At $1.9 billion per annum, the NSW South Coast is one of the most popular regions for domestic tourism in Australia

The latest property valuations are based on independent valuations for 18 properties or 30 per cent of the portfolio and directors' valuations over the remaining 42 properties.

Of the 31 Garden Villages portfolio, 14 external valuations gave an increase of $14.2 million. Mr Owen said the increased values for the Garden Villages portfolio reflects growing market recognition of the attractiveness of this asset class to meet a growing need for affordable seniors accommodation.

Of the 20 parks in the Active Lifestyle Estates portfolio, four assets were valued externally and saw a net increase in values of $10.8 million.

Mr Owen said the increased values validate the decision to focus on yield oriented assets through the Group's large portfolio of rental villages and the growing Active Lifestyle Estates business.

So far the strategy seems to be working.

This also came through in Ingenia's results for 2014-15. Revenue rose 42 per cent to $44.9 million. Net profit rose 123 per cent to $25.7 million. And the distribution rose 17 per cent to 1.35 cents per security.

A priority for this year is selling the remaining properties in the Settlers Lifestyle business including the five assets classified as held for sale. The capital will be applied to Ingenia's main Active Lifestyles Estates business.

The company said it is well positioned to continue growing the lifestyle parks business with a significant pipeline of accretive acquisitions. It also expects further growth in sales and settlements for manufactured homes as further projects are launched. (ASX: INA)


Above: Ingenia’s breakdown of income by division and activity 2014-15.

Below: In some of the better known holiday parks, tourism generates significantly higher income than permanent sites.

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