Urban Growth And Sustainable Development Will Shape Future Success

Key Takeaways

• Expansion into build-to-rent, land lease, and industrial segments diversifies income, reduces office and retail exposure, and supports smoother, recurring revenue growth.
  
• Strong residential pipeline, urban land holdings, and focus on sustainability position Mirvac to benefit from population growth, housing demand, and premium leasing trends.
  
• Execution challenges, cyclical asset risks, reliance on strong housing demand, development cost pressures, and funding constraints threaten Mirvac's earnings visibility and long-term growth prospects.

Catalysts

Founded in 1972, Mirvac is an Australian Securities Exchange (ASX) listed company, with an integrated asset creation and curation capability.

• Recovery in residential sales volumes (up 40% YoY) and a $1.9bn presale pipeline, combined with restocked development sites spanning high-growth urban corridors, positions Mirvac to benefit from continued urban population growth and housing demand, likely driving higher revenue and improved margins in FY26 and beyond.
  
• Leadership in sustainable development and recent reaffirmation of a 2030 net positive carbon target aligns with both growing tenant and investor preferences for ESG-compliant assets, expected to support higher leasing spreads, stronger occupancy (currently 98%), and potential premium rental rates-bolstering NOI and future earnings.
  
• Acceleration in build-to-rent, land lease, and industrial segments addresses institutional investment demand for diversified, stable income streams; this transition reduces exposure to challenged office and retail while smoothing earnings and supporting recurring revenue and net margin expansion.
  
• Strategic capital partnering and $1.3bn of new capital raised are unlocking value in the development pipeline, speeding up project turnovers, increasing funds under management, and providing Mirvac with greater balance sheet flexibility to capitalize on growth opportunities, likely enhancing EPS and NTA.
  
• Stabilization in construction costs and easing of supply chain risks, combined with broader sector tailwinds like potentially lower interest rates, create a more favorable environment for new project launches and completions, which should support margin recovery (guidance for 18–22%) and boost profitability as development earnings recover from FY25 trough levels.

Mirvac Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Mirvac Group's revenue will decrease by 26.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 2.5% today to 59.5% in 3 years time.
• Analysts expect earnings to reach A$640.2 million (and earnings per share of A$0.18) by about August 2028, up from A$68.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 18.2x on those 2028 earnings, down from 137.5x today. This future PE is lower than the current PE for the AU REITs industry at 27.5x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.98%, as per the Simply Wall St company report.

Mirvac Group Future Earnings Per Share Growth

Risks

• Substantial impairments and write-downs on several residential and commercial projects (including NINE at Willoughby, Charlton House, Quay in Brisbane, and challenges at 55 Pitt Street due to subcontractor insolvency) highlight the risk of project execution failures and construction market volatility, potentially causing lower earnings visibility and net margin compression if such issues recur.
  
• The group's active recycling of older office and retail assets in favor of industrial and living segments exposes it to cyclical risk-if the current office market recovery falters or asset values decline further, future planned disposals could be at weaker valuations, directly impacting future revenue, NTA growth, and profitability.
  
• Mirvac's build-to-sell and build-to-rent residential development strategy, though showing increased sales momentum, is still highly reliant on continued strong demand and stable settlement rates; adverse shifts in interest rates, affordability, or housing market sentiment could result in settlement defaults, lower sales, and reduced residential margins, impacting overall group earnings.
  
• Large and growing development pipeline, while providing potential earnings growth, carries risk from rising construction costs, delays, regulatory hurdles, or unsuccessful capital partnering-any deterioration in construction market conditions, cost inflation, or inability to secure capital partners could reduce development yields and project returns, affecting both revenue and net margins.
  
• High payout ratio and dependence on ongoing asset sales and capital partnering to fund growth could restrict retained earnings and balance sheet flexibility; in a tighter capital or regulatory environment, this may limit the company's ability to reinvest for long-term growth or withstand economic downturns, ultimately posing a risk to sustainable dividend growth and long-term earnings.

Valuation

• The analysts have a consensus price target of A$2.409 for Mirvac Group based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be A$1.1 billion, earnings will come to A$640.2 million, and it would be trading on a PE ratio of 18.2x, assuming you use a discount rate of 7.0%.
• Given the current share price of A$2.37, the analyst price target of A$2.41 is 1.6% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.