Forsyth Barr broker Lyn Howe said a recent Arvida development update showed the company was on track with its construction of 94 new units for delivery during full year 2018, which was in line with Forsyth Barr expectations.
"While we haven't changed our development projections, we have taken a more conservative view on operating costs and sales margins in full year 2019 and full year 2020," Mrs Howe said.
Given the slower housing market, Mrs Howe had taken a more conservative view on medium-term development and resales profit margins.
For its half year to September, Arvida total revenue rose by $7.7million to $46.9million, while its asset base grew by $76.5million to $537.2million.
It posted a more than 30% gain in underlying after-tax profit, booking $9.6million for the half.
Mrs Howe said new sales in second-half trading were expected to be at least 70, with near-term projects including 29 units in Christchurch and 25 in Auckland, both in the first quarter next year.
She maintained an "outperform" recommendation on the stock, but lowered the target price 5% to $1.52.
Mrs Howe maintained an unchanged development timetable of more than 400 units and beds, between full-year 2018 and full year 2021.
"This is only the consented pipeline and reflects about 40% of Arvida's potential pipeline of more than 1000 units and beds," she said.
She expected company growth to revolve around brownfield and greenfield developments, and through the acquisition of care-focused retirement facilities.
She noted Arvida's care occupancy rates were about 95%, better than the overall sector's 88%, but there could be headwinds from competition with quality beds and a focus on home-based support.
