LA Private

Eureka! Valuation uplift signals impressive growth

Eureka Group Holdings (ASX:EGH) has provided a positive update on its expected financial performance for the fiscal year ending on 30th June 2023. The company has upgraded its forecast for FY23 Underlying EBITDA guidance to a range of $12.2 million to $12.5 million, reflecting a significant annual growth of 16% to 19% compared to the previous year. This upgraded guidance surpasses the earlier projection of $11.8 million to $12.1 million.

“Maintaining high occupancy and benefiting from robust demand and rental growth, supported by CPI adjustments and government rental support, have been key factors driving our upgraded guidance,” said Eureka’s Executive Chairman, Mr. Murray Boyte. He attributed the positive outlook to the Group’s strategy in the independent senior living segment of the affordable build-to-rent (BTR) sector.

Moreover, draft independent valuations of Eureka’s property portfolio indicate a net revaluation uplift of $17.5 million or approximately 5.8 cents per share from 31st December 2022 to 30th June 2023. This revaluation uplift, net of capital expenditure, has improved Eureka’s net tangible assets (NTA) per share by around 4.4 cents after tax, representing an impressive 11% increase.

“The valuation uplift affirms our strategy in the independent senior living segment, as it has been recognised by independent valuers, resulting in a firming of the value of our owned assets,” Mr. Boyte added, highlighting the positive impact on the company’s capitalisation rate.

Mr. Boyte expressed confidence in Eureka’s growth strategy beyond FY23, stating, “We are well-positioned for continued growth through organic rent growth, strategic development and expansion projects, and the adoption of new technology.” He emphasised the strong demand and high levels of enquiry experienced by Eureka, demonstrating the market’s favourable response. Most of its villages currently maintain an occupancy rate exceeding 98%.

In terms of operational updates, Eureka’s Brassall development in south-east Queensland is progressing well, with the first stage of 10 out of 51 homes expected to be completed by 31st July 2023. “We have already secured rental agreements for 31 homes at rents that meet or exceed projected levels, indicating a positive market response,” Mr. Boyte stated.

Eureka also announced that its principal lender, NAB, has extended the Group’s $83 million debt facility through to 31st March 2026, providing further stability and support for its operations.

The independent valuations of Eureka’s property portfolio reaffirm the growing demand for specialised affordable rental accommodations in the build-to-rent sector, particularly among retirees. “The draft valuations confirm the favourable locations of our properties and underline the increasing market demand,” said Mr. Boyte. Eureka expects no significant changes upon receipt of the final valuation reports, subject to review by the company’s external auditors.