Manufactured Estates on the rise, Australian Financial Review

The manufactured home estate sector is gaining traction with two of its largest listed players, Gateway Lifestyle and Ingenia Communities, winning strong endorsement on their growth prospects from CLSA analysts,

The $720 million Gateway Lifestyle floated in June last year and whilst $420 million Ingenia Communities listed more than a decade ago, it is undergoing a restructure.  Both property groups are focussed on an emerging sector which provides modular housing as budget accomodation, typically for retirees in caravan-park style settings.

CLSA analysts Sholto Maconochie and Michael Scott have initiated coverage of both stocks, with an outperform on both.

Gateway is forecast to deliver hefty 17.7% total return over the next 12 months.  It is currently trading around $2.82 and has a target price of $3.19.  The expectations for Ingenia are just as sanguine with a forecast 17.6 per cent return and a price target of $3.16, compared with current pricing around $2.78.

Gateway has gained more than 40 per cent since listing, while Ingenia has added 10 per cent over the same period. In that time, the A-REIT 300 index has improved just 3 per cent.

Both companies will benefit from Australia’s ageing population, federal government support of the sector an their position within a highly fragmented industry with strong fundamentals, the analysts wrote in their report.

“We believe both can capitalise on this over the longer term from further consolidation and an increased acceptance of manufactured home estates as an attractive and affordable retirement living solution.”

More than half the nation’s senior citizens have no super.  Two percent of seniors are residing in the modular housing estates.  That demographic will rise to 22 per cent over the next 40 years.  There are key differences between the two stocks.  Ingenia emerged from a group of trusts once managed by Dutch giant ING.

It owns tourism parks and rental villages as well its increasing exposure to the MHE sector.  The newcomer Gateway is a pure-play MHE owner, which is converting and expanding existing and acquired sites.

“Both companies are exposed to any softness in the housing market, development risk, manufactured housing supply risk and changes in government legislation”, the analysts wrote.

Nick Lenaghan

 

February 01,2016