The following is an extract from our full report this week:
FUNDAMENTAL VIEW
At its 3Q15 operational update, MGR reaffirmed FY15 guidance for operating earnings of 12.2 to 12.3 cents per security and for a full-year distribution of 9.2 to 9.4 cents per security.
MGR remains well placed to overcome the challenges it faces, with the sell down in the stock on the back of these issues presenting an attractive entry point around current levels. In particular, any further weakness in the share price would make the yield more attractive relative to peers, given that:
i. MGR’s 1-year forward yield (5.1%) broadly in line with that for major ASX-listed REITs, notably SGP (5.6%), GPT (5.2%) and Dexus (DXS) (5.5%) and
ii. MGR’s forecast EPS growth for FY16 (+6.3%) outstrips the above peers (SGP: +3.7%, GPT: +3.8% and DXS: +4.7%).
CHART VIEW
MGR spent nearly 18 months forming an ascending triangle before breaking out of it earlier this year. Having taken only three weeks to rally to a high, it has then taken nearly five times as long to retest that breakout. The timing of this is quite bullish and at current levels MGR has the potential to turn around here and recommence the uptrend. A target would be a retest of February high up near $2.20.
