Mulcahy to unlock Mirvac's value as he addresses investor concerns
The Mirvac board is assessing how to “unlock the full value” of a business that is performing well but seemingly undervalued by the market.
Chairman John Mulcahy, told the AGM in Brisbane on Thursday that the the business “is in great shape and performing well.”
“Despite theres considerable achievements, the market does not value the business in a way that fully reflects the performance of our high quality portfolios,” he said.
“As a result of this, the board and management are currently assessing how we can unlock the full value of our business, while ensuring we can maintain the benefits of our creation and development capabilitites.”
In particular, the market has a concern about the risk that the many apartments sold-off-the plan may not settle, with a resulting loss of profit.
Many investment bankers believe Mirvac should split its passive, property owning operations from its residential development arm. Though, as Mr Mulcahy acknowledged, the two are linked both through financing and through the development capability which Mirvac uses to create more investment product.
Mr Mulcahy did specifically address the concern about settlement risk, particularly with the changes to investment lending.
He said Mirvac carefully monitored its settlement risk. “I am confident we are well equipped to deal with any future settlement risk and note that our long term average default rate is less than one per cent and peaked at just three per cent in 2009 and 2011.
Mr Mulcahy also addressed Mirvac’s mention in the current Royal Commission regarding allegations of “irregular supplier invoices” and former Mirvac employees.
“I appreciate your concerns….and I can assure you the board and management share your concerns and in no way condone this type of behaviour,” he said.
“Mirvac has thoroughly reviewed its policies and procedures to mitigate the risk of such practices occurring again.”
The third investor concern addressed by Mr Mulcahy was about fears that the property market would crash. He said it was a very Sydney concern.
“While we agree that the market has reached its peak, we do not believe this will lead to significant reductions in price; rather we expect price growth to moderate,” he said
