Sugar hungover

It’s been a while since we had a look at this key local agricultural commodity where sugar prices have been struggling in a glutted market: Australian sugar industry sours as competing nations create a global glut, causing a price drop

Sugar310518

Prices have bounced back off lows in recent weeks apparently driven by a truckers strike in Brazil. Commentary and prices at the current QSL Market Update.

Advertisements

Hotel Futures 2018 Report

Dransfield last month released their Hotel Futures 2018. A point of interest in there is that ABS has discontinued the Tourist Accommodation series as at FY2016. This was previously an input to the Hotel Futures report. Anyway with funding from Austrade (which is where Tourism Research Australia resides) a replacement Australian Accommodation Monitor series has apparently been outsourced to STR which is to be published later this year.

In the meantime STR have provided data to Dransfield for their report which comes with multiple disclaimers that any republication or re-use of any STR data is naughty. There is useful analysis by Dransfield of differences between the ABS and STR sample. It is pointed out that STR don’t have the ability to compel information providers as the ABS does.

In most cases the STR sample has a higher room rate than the census as it represents the larger, more professional establishments in the relevant geography. In many cases these also have higher occupancy. From the perspective of the majority of readers of Hotel Futures, we think this STR data is more relevant because it is more representative of the investment class hotel assets that our readership is interested in.

Anyway there is good general commentary and analysis of what this all means for Cairns and Port Douglas in the report so will restrict this post to the city outlook summary:

Material development activity is planned, although focussed on Cairns. It is expected to be absorbed despite a minor downgrade in the demand growth outlook. Long term RevPAR expectations are for 3.4% growth p.a., an upgrade on prior expectations driven by short term outperformance.

The long term RevPAR forecast there to FY2026 comes in just below the national forecast for Australia at 4% growth. We will await the Australian Accommodation Monitor from Austrade TRA.

Turbulence at Airport

The seasonally volatile period continues at the airport with rather a rough April impacted by shifts in Easter and Cyclone Debbie the previous year.

2017 had the highest April passenger number on record due to the timing of Easter and impacts from Cyclone Debbie which crossed the Queensland coast on 28 March 2017. Easter fell on 1 April this year rather than 16 April in 2017, which shifted passengers from April into March. April 2017 passenger numbers were increased by people travelling to Cairns instead of areas in central Queensland that had been affected by Cyclone Debbie.

It’s certainly to be hoped this explains the decline with domestic down 4.9% and international down 4.2% on last year. You would have to go back to the GFC aftermath years to find a previous domestic monthly decline that size.

Airport April 2Airport April 1

Difficult to determine the impact of these seasonal events from commentary provided. BITRE comparative national airport and route data is currently only updated to February. ASX listed Sydney Airport has updated April stats and actually recorded domestic growth above their annual number.

Sydney Airport CEO Geoff Culbert said, “Passenger numbers have strengthened at Sydney Airport increasing 2.6% in the month of April over the prior corresponding period (pcp). International traffic grew 1.8% in April, with increased capacity of 6.5% being offset by lower load factors. Load factors were impacted by the earlier Easter holiday period for 2018 compared to 2017, resulting in a very strong comparative period.
“Domestic growth was a robust 3.1% for April compared to the pcp, driven by a 0.6 percentage point improvement in load factors and a 2.3% increase in capacity.”

Hopefully a less eventful period ahead will provide a better indicator of underlying trends.

Source: Cairns Airport

Corporate Coffee Gossip

Reef Casino AGM was today and provided an update on current trading:

Our current estimate of the distributable profit* for the first half year from 1 January 2018 to 30 June 2018 is approximately $4.8 million.
So far in the first 4 months of this year, total rental paid by the Reef Hotel Casino to the Trust is up by 19% compared to the same period last year. This partly reflects a degree of short term trading variability in the casino industry and a relatively soft start to last year.
Key factors include an improved Chinese New Year high tourist season, strong performance in table games premium play and strong performance by hotel room operations. We continue to take on the local competition in electronic gaming machine operations and our food and beverage operations continue to strongly support the overall performance of the complex.

That would sound impressive except that ex the rebound from last years slump it would be the lowest 1H result since 2012. It isn’t a stellar result.

Reef 1H2018

Attending this AGM is always entertaining with questions from the floor winner this year dress standards and the appropriateness of Jackie Howe singlets and thongs in the context of gender discrimination. They probably got lost looking for Tradies Bar.

Anyway independent director Keith DeLacy managed a re-election speech this time without having to point to his head for clarification when he said independence was a state of his mind. There was also a rather curious joking comment from doddering Chairman Ben on inadequate takeover proposals. CEO Alan Tan also suggested Commonwealth Games benefits had been overhyped. There seems to be an increased focus on premium play including in capex plans.

Questions at the AGM itself are usually unproductive much better to retire and discuss over coffee. Alan Tan wasn’t really as forthcoming as I would have liked on the EGM pokie competition and expanded hotel hours which is very clearly an issue with this business. We did however agree that capital flight may be an appropriate term for the current hotel investments surge by the GA Group in Cairns. Their absence of any previous hotel experience was noted.

Meanwhile in other corporate activity Mantra Group shareholders approved the scheme of arrangement and the takeover by Accor will complete next week. Ex Mantra CEO Bob East wont be unemployed long and parachutes onto the board of Experience Co where he will subsequently becomes Chairman. A win for that company with a significant local presence.

Disclaimer: Cairns Economy maintains a modest interest in Reef Casino via a SMSF. This is cheaper than tickets to local theatre.

Cairns continues to Win

March data disrupted by rain and Easter continues to throw up volatility including in the Queensland gaming data for pokies.

Cairns Gaming 01

Never mind. The March blip related to Good Friday trading restrictions coming into the month and perhaps wet season rain didn’t stop the restoration of high growth in April. At the same time growth in Queensland seems to be slip sliding away with clubs back into negative territory.

Cairns Gaming 02

Reef Casino AGM on Friday may provide some commentary on recent trends.

Go North Old Man*

A significant population trend in Cairns based on most recent data is that the North significantly outperforms the South. This is SA3 data where Cairns – South is the city and designated southern growth corridor. It must be so hard when people don’t go where you want them to.

Pop Growth

Cairns Urban = Cairns – North + Cairns – South

To update some perspective Cairns-North is a much smaller SA3 than Cairns-South. Since 2001 the Cairns-North population has grown from 44% of Cairns-South to 52% in 2017. Population growth should be expected to be higher in the northern and southern areas with available land and the inner city with higher density development. Key housing growth areas are Trinity Beach-Smithfield/Redlynch in the North and Gordonvale/Edmonton in the South. The inner city is something to look at further.

This is growth over the same time in nominal numbers:

cairns population 2

*Cairns – North median age is 3 years older than Cairns – South on 2016 Census data.

 

 

 

 

How good building approvals data in Cairns?

Latest ABS regional building approval data from Conus: Regional Building Approvals; Rest of QLD flat for the year as Far North does better

This latest data is to March 2018. So far the Nova development residential units don’t appear to be in the ABS data. This is despite some construction activity for foundation pilings currently on site which commenced in April and had been well hyped in local media prior to commencement. The usual problem with this data is that building approvals cant always be assumed to translate into construction commencements rather than the reverse.

Also noted in the most recent HTW CairnsWatch April 2018:

Building approval figures for the Cairns urban area for the period October 2016 to September 2017 have been revised significantly upwards by the ABS (by a 22% increase compared to before), with the result that the building approval slump previously recorded for 2016-17 has now been substantially revised away. Building approval levels over the last four years now present a flattish trend that has remained at consistently low levels by long term historical standards.

Certainly not the first time and I have previously come unstuck on not insignificant revisions in the Cairns data. ABS Explanatory Notes:

The information provided to the Australian Bureau of Statistics (ABS) and included in estimates for any month may be revised or corrected in later months. This can occur as a result of corrections made by a provider of data, the late provision of approval records and, occasionally, by approvals being identified after construction work has commenced.

ABS: REVISIONS TO BUILDING APPROVAL STATISTICS

I previously queried the status of the Nova development and quality of the data a year ago (May 2017) when the preliminary operational works were underway with a reply from Kelly Reaston at Cairns Regional Council.

Thank you for your email.
The Nova City approval process is similar to all other Development Approval requirements within the State of Queensland.
The Applicant must seek the following approvals:-
1. Development Approval;
2. Operational Works Approvals; and
3. Building Approvals.
At this stage the Applicant has obtained Development Approvals for the towers and operational works approval for associated drainage works. Building approvals are obtained through a private Building Certifier.
The timeframes for progressing these approvals and the ultimate construction of the development is a matter for the Applicant.
I trust this information addresses your enquiry.

There have been regular reports since of imminent commencement mostly in the context of sales promotion as previously posted Nova City Flurry (February 2018) following an email from Nova marketing:

The most exciting thing of course, will be to see Nova City coming out of the ground. Construction is starting with pilings, the beginning of April!
We had a flurry of buying just prior to Christmas which saw some of our best two bedroom apartments sell to some local Cairns buyers so we recommend that if you are looking to purchase one of our apartments, that you beat the rush and secure your preferred apartment now. We only have 5 one bedroom apartments left and limited floors available on the front overlooking the CBD skyline and out to the Coral Sea.

Data supplied by Aspial and World Class Global to Singapore Stock Exchange on Nova sales:

Project Nova City Tower 1
Type Residential & Commercial
Total Units 187
Launch Date 4Q2016 (calendar year)
Units Launched 101
20172Q % Sold* 34%
20173Q % Sold* 34%
20174Q % Sold* 35%
20181Q % Sold* 39%

* % sold based on number of units launched

No idea how others do their maths but I make that 5 unit sales in 9 months despite yet another hyperbolic headline in the Cairns Post today: “Locals rush Nova units”, with a suggestion from Nova marketing that the number may be closer to 50%. The latest quarterly report from WGC this month makes no comment on construction progress at Nova. The current marketing office building on site was actually completed in 2015.

March Quarter Rental Data

March rental bond data from RTA confirm previous trends with incremental gains in Cairns and a turnaround in Mackay.

Q12018 Rentals 2Q12018 Rentals 3

Comparison of Queensland major regions for 3 bedroom house median rent in March Quarter 2018:

Q12018 Rentals 1

Gladstone rents look interesting although the menu at the Gladstone Yacht Club (aka Port Curtis Sailing Club) would need to provide better value than currently to attract my interest as a potential resident. Also Spaghetti Bolognese with Chips should be restored to the menu in recognition of Gladstone’s historic cultural values.

Note: New rental bonds lodged in Cairns were the lowest for the comparable quarter in some years and will be looked at further. There is good data here to explore although the excel format files provided by RTA are not conducive to easy analysis.