Does Ingenia Communities Group have a very strong balance sheet with considerable liquidity?

Team Veye | 26 Mar 2020 ASX - INA
Does Ingenia Communities Group have a very strong balance sheet with considerable liquidity?

Ingenia Communities Group (ASX: INA)

Ingenia trading and guidance update

Ingenia Communities Group (ASX: INA) on 25 March 2020 provided the following update to the Group’s trading activity and FY20 guidance, in light of the uncertain environment and potential extended duration of the COVID-19 pandemic.

Ingenia has a very strong balance sheet, considerable liquidity and a sizeable underlying base of stable rental revenues, largely underpinned by Commonwealth Government pension payments and rent assistance which continues to provide the Group with consistent, highly predictable rental cash flows.

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(Chart source: TradingView)

Key points 

  • Cash and committed undrawn bank facilities available exceeding $200 million
  • LVR at 24 March of 27.7% compared to the covenant of 50% 
  • 205 new home settlements (corresponding period FY19: 176 homes) with a further 101 homes under contract and 155 deposited or reserved 
  • Ingenia Gardens presently trading at near record occupancy, at 92%.

 

New home settlements have been moderately impacted by recent events with some prospective residents seeking extra time to sell their home which will likely see some settlements transfer from Q4 FY20 into Q1-2 FY21. Cancellations have been limited to date and inspections are continuing and are now online. Based upon a record month for open home inspections and deposits in February Ingenia was on track for increased settlements on FY19, until the rapid and unprecedented escalation of COVID-19. (Data Source – Company Reports)

 

Veye’s Take

The Group’s balance sheet is well-positioned. Ingenia has significant headroom in relation to its banking covenants and over $200 million of cash on hand and undrawn committed debt. Ingenia will comfortably meet its covenant on 30 June 2020. Ingenia is in the strong financial position to manage its way through this crisis. This includes spending the past eight years building a secure, recurring revenue model that delivers a stable rental base from over 5,800 income-producing sites across the portfolio. As the COVID-19 situation continues to evolve, this steady income flow will help underpin the business during this difficult period. Ingenia’s key demand drivers are still firmly in place, which is an ageing population looking for high-quality affordable housing. The stock had come down to its support area from where it has the potential to rebound from there. Veye maintains a "Hold" on “Ingenia Communities Group at the current price of $2.97

 

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