McGrath was initially floated on the market in December 2015, the initial float price was $2.10, the company is currently trading at $1.40. This is a drop 30% since listing, the stock fell further since it announced it first half results this week.
The results showed revenue up 33% to $54.3 million however earnings before interest tax depreciation and amortization was down 37% and Net Profit after tax was down 82% with a profit of $400,000 for the half year. The acquisition of the Smollen Group which was financed through the listing of the company has been successful allowing the increase of market share for McGrath.
The cost of the listing and the slowdown in Chinese buyers in the pre-Christmas period has had an effect on the business performance in the near term. There was no dividend announced with the results however this is in line with the prospectus. The prospectus indicated that the divided could be up to $0.045 for the full year and McGrath are still confident that the full year result will be in line with the prospectus forecast.
McGrath listed the challenges facing the sector over the second half of the year will be the slowdown in Chinese buyers, stock market volatility, APRA regulatory changes and concerns about possible changes to negative gearing.
The property sector is a tough one at present with unemployment high, government looking to change tax rules around negative gearing and the talk of a property bubble. I expect both first home owners and investors alike are cautious on entering into this sector. The one positive is that interest rates look set to stay low longer.
At present the property sector looks too high risk to invest in, we have already seen the banking sector lose ground this week as overseas Hedge funds reduce their positions on the speculation of an Australian property bubble. For now McGrath is on my wait and see list.