EGH - Eureka Group Holdings Ltd

[Dona Ferentes]

Eureka Group Holdings Limited (EGH) is a property asset manager of senior independent living communities in Australia. EGH focuses on flexible guest and care services with 30 owned villages and 9 villages under management representing 2,015 units.

Taking a bit of a hit with Corona, like most other players in the sector. With a focus on independent living, EGH is probably closer to LIC and INA than some of the age care outfits (like Estia EHE and Japara JHC) but that hasn't helped any.

Target market was the growing retirement population and, as stated, the objective was "to grow and scale the business, through acquisition of traditional villages and development of existing assets; Portfolio and greenfield developments to follow at a later stage." I suspect decisions by those considering such lifestyle options are reconsidering, based on a reduction of individuals' "wealth effect" and general uncertainty.

One funds manager (NCC) has a position and is generally positive about Eureka

• EGH have seen no changes in occupancy levels to date.
• Systems and processes have been put in place to minimise risk across all EGH villages.
• Total asset value is $0.34 per share with net debt of circa 40% as at 31 December 2019.
• >90% of cash flows are through contracted rental accommodation agreements

 

[peter2]

No one interested in EGH. Perhaps you might when you get older.
Since the Covid low (Mar22) the share price of EGH grew +100%. Although it's been all downhill in 2022. Monthly chart shown.

EGH has recently completed another acquisition funded by a cap raise. I notice there was a shortfall in the retail component as price traded below the spp price (0.47). The underwriters picked up the shortfall.

This purchase takes the number of units managed to 2658.

 

[The Triangle]

No one interested in EGH. Perhaps you might when you get older.
Since the Covid low (Mar22) the share price of EGH grew +100%. Although it's been all downhill in 2022. Monthly chart shown.

View attachment 149807

EGH has recently completed another acquisition funded by a cap raise. I notice there was a shortfall in the retail component as price traded below the spp price (0.47). The underwriters picked up the shortfall.

This purchase takes the number of units managed to 2658.

What I can't figure out is how much they are spending on capital/property upkeep. Everything looks like it goes to additions to investment property. There is virtually no "plant and equipment" spending which I find annoying. In their annual report they talk about "enhancing" of units which last year was $3m. I guess I can call that sustaining capital/maintenance?

They're currently forecasting an EBITDA of $11.6 -11.9m which they say represents growth of 10.3% to 13.2%. With $70 million of debt, I'm going to assume that whatever growth they've had in profits as a result of EBITDA growth will be wiped out by increased interest rates.

I'll see how the half yearly comes out, but it's difficult for me to see how this is a good value. Dividend is only around 3% as well. Also - as I always say - who is selling them the units that they are buying? Australia is small - a lot of sloppy seconds in the asset ownership space.

 

[Dona Ferentes]

“There’s a lot of capital chasing land lease communities or build to rent, but virtually no capital being invested in affordable over-50s rental accommodation and there’s significant unmet demand”
- Simon Owen, CEO, Eureka Group Ltd

 

[Dona Ferentes]

t/o lapsed

from June. Eureka notes Aspen Group Limited’s ASX announcement dated 29 May 2024 regarding the expiry of its unsolicited all-scrip off-market takeover offer to acquire all of the ordinary shares in Eureka.

Aspen’s bid to gain control of Eureka was unsuccessful, with the majority of shareholders demonstrating support for the Eureka Board and its existing build-to-rent strategy by rejecting Aspen’s offer. Aspen’s holding in Eureka is 35.87% following Cooper Investors’ acceptance of the Offer for its 22.08% shareholding. Aspen received acceptances of less than 1.0% from Eureka’s remaining shareholders.

The Board of Eureka had unanimously recommended that shareholders reject the Offer and stated in its Target’s Statement that Eureka has an attractive future as the only listed pure play provider of affordable seniors’ rental accommodation in Australia, with a resilient revenue stream underpinned by inflation-indexed Government payments.

The Board is committed to pursuing a growth strategy for Eureka in the best interests of all shareholders, including acquisitions, organic growth opportunities, greenfield and infill development, as well as asset recycling.

Eureka reaffirms its midpoint FY24 underlying EPS guidance of 3.00 cents per share.

The Eureka Board is prioritising the appointment of a new CEO and will update shareholders in due course.

.
..and kicking on.