Gateway Lifestyle: Has the horse bolted?
The FY16 reporting season has passed. Most results passed without fanfare. We did, however, receive a few positive surprises and a few negative ones. Positive surprises included Motorcycle Holdings, Baby Bunting, iSentia and Sirtex Medical. We received a negative surprise from Gateway Lifestyle (GTY-AU). In particular, the company guided to 5% earnings growth in FY17 when the consensus of analysts’ expectations pre result was for 26% growth. The stock fell 17% the day the result was released. The analyst consensus for pretax earnings for FY17 has now been revised down from $57m to $48m. The Gateway share price a week or so later is still sitting at the lower level although it has not, so far, fallen further.
UBS Asset Management
UBS Asset Management
We have not sold any of our Gateway shares. Why not? We remain very positive on the long-term outlook for low cost, manufactured retirement living that Gateway provide. Ingenia Communities (INA-AU) and Lifestyle Communities (LIC-AU) both provide a similar product and both have had benign, in line reporting season outcomes. We are confident that the model is not broken. So what happened to Gateway. We believe that it is a combination of growing pains and the equity market expecting too much too quickly. Gateway has grown its assets very quickly and the market expected earnings results from this asset base quickly. The Company, who only listed a little over a year ago have also been scaling up their management and development and selling capability since the IPO but these things take time.
We have met management of Gateway post the result and are confident in the medium and long term strategy. We believe we can also see how the market's expectations and the company's short-term execution had become misaligned. These things happen. We do not believe there is anything fundamentally wrong and at this stage are sticking with our investment in this company and the sector.
Contributed by Stephen Wood, Portfolio Manager at UBS Australia: (VIEW LINK)
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UBS Asset Management offers investment capabilities and investment styles across all major traditional and alternative asset classes. These include equity, fixed income, currency, hedge fund, real estate, infrastructure and private equity investment capabilities that can also be combined into multi-asset strategies.
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UBS Asset Management
UBS Asset Management
UBS Asset Management offers investment capabilities and investment styles across all major traditional and alternative asset classes. These include equity, fixed income, currency, hedge fund, real estate, infrastructure and private equity...
Expertise
No areas of expertise
UBS Asset Management
UBS Asset Management
UBS Asset Management offers investment capabilities and investment styles across all major traditional and alternative asset classes. These include equity, fixed income, currency, hedge fund, real estate, infrastructure and private equity...
Expertise
No areas of expertise
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