The latest analyst coverage could presage a bad day for Growthpoint Properties Limited (JSE:GRT), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
Following the latest downgrade, the current consensus, from the twin analysts covering Growthpoint Properties, is for revenues of R11b in 2022, which would reflect a definite 16% reduction in Growthpoint Properties' sales over the past 12 months. Before the latest update, the analysts were foreseeing R13b of revenue in 2022. It looks like forecasts have become a fair bit less optimistic on Growthpoint Properties, given the substantial drop in revenue estimates.
There was no particular change to the consensus price target of R14.65, with Growthpoint Properties' latest outlook seemingly not enough to result in a change of valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Growthpoint Properties, with the most bullish analyst valuing it at R17.50 and the most bearish at R13.00 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Growthpoint Properties shareholders.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 16% by the end of 2022. This indicates a significant reduction from annual growth of 5.0% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 2.0% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Growthpoint Properties is expected to lag the wider industry.
The Bottom Line
The clear low-light was that analysts slashing their revenue forecasts for Growthpoint Properties this year. They also expect company revenue to perform worse than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Growthpoint Properties going forwards.
Thirsting for more data? We have estimates for Growthpoint Properties from its twin analysts out until 2024, and you can see them free on our platform here.
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Growthpoint is the largest South African primary JSE-listed REIT with a quality portfolio of 440 directly owned properties in South Africa (RSA) valued at R73.4bn, including four hospitals and one medical chambers valued at R2.6bn owned by Growthpoint Healthcare Property Holdings (RF) Limited (GHPH).
Average dividend payer and slightly overvalued.