Affordability Gives Aspen The Defensive Edge

Small Caps | 10:00 AM

Aspen Group's upcoming investor tour offers a potential share price catalyst, with improving earnings visibility set against cautious macro sentiment towards the housing sector.

• Australia’s housing shortage plays to Aspen’s affordable edge
• Rental resilience meets an accelerating development pipeline
• Conservative gearing provides firepower for the next growth phase
• Adelaide emerges as a key catalyst

By Danielle Ecuyer

Profit for purpose

With all the brouhaha over Australia’s housing sector and the prospect of rising interest rates, it is all too easy to brush over the sector without considering the nuances and context of some stocks which are not only outperforming but have scope to ride out the cycle.

Tucked into the ASX300 is housing developer cum operator Aspen Group ((APZ)), with a $1.1bn market capitalisation.

Aspen is a provider of quality affordable accommodation, with management going to some lengths at the FY26 results to articulate the challenges around housing affordability in Australia.

Around 35% of households rent, and the bottom 40% of households by income can only afford 10% of advertised rentals.

At a presentation earlier in 2026, the joint CEOs indicated there were more than four million households with an annual income of less than $90,000 needing affordable accommodation. This is characterised as under $400,000 to buy or less than $400 per week.

Aspen points to the past few decades whereby private investors have represented the entire increase in what they refer to as “essential housing”.

State and territory governments have increasingly withdrawn from the segment, while in FY25 collecting stamp duty and land tax of $54bn, up 81% in five years, and investing $11bn in their social housing programs.

The bottom 25% of households by income cannot afford any advertised rentals, yet as the company states, social housing is only 4% of the total housing stock.

Aspen views the Federal Government’s recent Budget changes to housing investment as likely to further constrain the supply of affordable housing. In turn, this is expected to result in higher rents and prices, particularly at the affordable end of the market.

Even against a backdrop of falling house prices and rising interest rates, Aspen comfortably asserted opportunities would continue to grow as the supply of affordable housing remains constrained.

The company's mission is to “solve Australia’s housing shortfall as the leading value-for-money accommodation provider with over 10,000 dwellings and sites by 2030”.

FY26 results delivered a comfortable beat 

The company operates four segments:

• Residential, whereby it owns dwellings/apartments that are rented out.
• Lifestyle/land lease, whereby Aspen owns land in over-50s communities while residents can own homes and pay ongoing site rent, generating a recurring rental stream from the underlying land.
• Parks/accommodation encompasses holiday parks and short-stay accommodation such as cabins.
• Corporate/workforce accommodation, such as Aspen Karratha, which serves both residential and corporate/workforce customers.

As at the end of FY26, Aspen had 7,222 dwellings and sites, with the total asset value at $800m across NSW, Vic, WA, Qld, SA and the NT.

Zooming out, Morningstar observes Aspen has achieved a three-year EPS growth rate of 21.4%, which places it in the top 30% of stocks globally.

Jarden, post the FY26 results, highlights scope for Aspen to grow EPS over the next three years by 12% per annum.

Digging a little deeper in the FY26 results, Bell Potter noted pre-tax EPS came in as a slight beat on guidance and in line with consensus and expectations.

But for the Citi analyst, it was a strong beat, indicating pre-tax EPS rose 30%, assisted by a 21% rise in net rental income and a 71% “surge” in realised development profit.

As highlighted by Moelis, the core Residential rental business generated 22% of FY26 EBITDA. Average rents grew 4% to $379 per week with the EBITDA margin up to 67.4% from 65.5%.

Moelis believes organic growth will continue, singling out the relatively affordable slant to Aspen’s Perth-based rental portfolio.

Growth is also flagged to come from the repurposing of Australind Grove, a refurbishment of Upper Mount Gravatt and other build-to-rent developments as they ramp up over FY27 and FY28.

Park assets, which represented 33% of FY26 EBITDA, saw average like-for-like rents rise 11%, which dropped to the EBITDA margin, generating an uplift to 48% from 43%.

Karratha assisted with its ongoing tight accommodation market as well as management’s strategy to target price/occupancy.

Development business represented 34% of FY26 EBITDA with settlements up to 161 from 111 in FY25, including 131 land lease houses and 30 land sites.

The development margin rose to 33.4% from 32.2%, including an improvement in the second half on the first half, Moelis explains.

FY27 guidance

FY27 settlement guidance was upgraded to 240 from 220, with Bell Potter emphasising Aspen holds 154 settlements and contracts on hand, or 68% of FY27 Development profit guidance already.

Overall, FY27 guidance was upgraded for pre-tax EPS growth of 20%-plus, a rise of 4.4% on previous guidance. EBITDA and DPS guidance are for 22% and 9% growth, respectively.

Moelis expands on guidance, suggesting it implies over 50% growth in Development EBITDA, which is expected to represent around 43% of expected group EBITDA.

For FY28, this broker’s forecast implies 20% growth across multiple projects at Ravenswood, Wallaroo, ACP and Australind.

Management plans to ramp up less mature projects at Ravenswood, Wallaroo, Australind and Adelaide Caravan Park, where the latter has DA approval with 46 build-to-sell sites that are anticipated to capture higher selling prices.

Long-term growth looks likely with a total pipeline of nearly 3,000 sites, including those for build-to-rent.

Against a backdrop of rising interest rates, the question of cash flow, leverage and the balance sheet remains key for Aspen.

Jarden states “debt headwinds are not a concern” due to the robust levels of growth, while the balance sheet can accommodate any possible “dislocation” that could evolve.

Citi indicates the rental portfolio is basically fully occupied, and the balance sheet is geared conservatively at a 22% loan-to-value ratio.

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