On Friday, UBS upgraded the stock rating for Mirvac Group (MGR:AU) (OTC: OTC:MRVGF) from Neutral to Buy, albeit slightly reducing the price target to AUD2.19 from AUD2.23. The upgrade reflects a positive shift in the investment firm's outlook on the Australian real estate investment trust (A-REIT), citing several factors that could drive the company's earnings growth over the next few years.
The revision is based on expectations that Mirvac Group will experience a compound annual growth rate (CAGR) of 6% in operating earnings per share (OEPS) from the fiscal year 2025 through 2028.
This anticipated growth is attributed to earnings from residential and commercial developments, increased passive income upon the completion of these developments, and the easing of interest cost pressures.
Mirvac's forward earnings multiple for the fiscal year 2025 is projected to be 13 times, which is lower than that of other A-REITs. Despite the challenges foreseen for fiscal year 2025, UBS anticipates a more favorable outlook in subsequent years. This optimism is partly due to the progress of significant projects such as Harbourside and 55 Pitt Street, which are moving through pre-sales and pre-leasing stages.
The slight reduction in the price target is the result of forecast revisions and minor adjustments to net asset value (NAV) valuation assumptions. UBS's updated stance reflects a belief in Mirvac's potential to outperform amidst modest investor expectations and the company's recent underperformance in the market.
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