Augusta Capital Limited (NZSE:AUG) is a NZ$93.22M real estate investment trust (REIT), which is a collective vehicle for investing in real estate that originated in the US and has since been taken on board globally. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the NZ stock market as a whole. Today, I’ll take you through the real estate sector outlook, and also determine whether Augusta Capital is a laggard or leader relative to its real estate sector peers. See our latest analysis for Augusta Capital
What’s the catalyst for Augusta Capital’s sector growth?
Concerns surrounding rate increases and treasury yield movements have made investors dubious around investing in REIT stocks. This is because REITs tend to be dependent on debt funding. They are also considered as bond investment alternatives due to their high and stable dividend payments. Over the past year, the industry saw negative growth of -27.52%, underperforming the NZ market growth of 3.55%. Augusta Capital lags the pack with its negative growth rate of -39.65% over the past year, which indicates the company will be growing at a slower pace than its REIT peers. However, the future seems brighter, as analysts expect an industry-beating , albeit negative, growth rate of -9.85% in the upcoming year.
Is Augusta Capital and the sector relatively cheap?
REIT companies are typically trading at a PE of 11.35x, relatively similar to the rest of the NZ stock market PE of 14.09x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 8.75% on equities compared to the market’s 10.72%. On the stock-level, Augusta Capital is trading at a PE ratio of 13.42x, which is relatively in-line with the average REIT stock. In terms of returns, Augusta Capital generated 8.18% in the past year, in-line with its industry average.
Next Steps:
Augusta Capital’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this high growth prospect is most likely factored into the share price, given the stock is trading in-line with its peers. If Augusta Capital has been on your watchlist for a while, now may be the time to enter into the stock. If you like its growth prospects, you’ll be paying a fair value for the company. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time. However, before you make a decision on the stock, I suggest you look at Augusta Capital’s fundamentals in order to build a holistic investment thesis.