Real Estate Stocks Amidst Australia’s Property Scenario – GMG, SCG, DXS And VCX

REIT Stocks Amidst Australia’s Property Scenario - GMG, SCG, DXS, VCX

The state of the Australian property market is such that the fall in home prices is easing down in Australia’s two biggest cities, Sydney and Melbourne, as the auction clearance rates rose strongly after the federal election, leading some analysts to predict that the property market will bottom in 2019.

Let’s look at the four prominent real estate players in Australia with massive portfolios.

Goodman Group

Australia-based commercial and industrial property group, Goodman Group (ASX: GMG) owns, develops and manages real estate projects across Australia as well as internationally in New Zealand, Asia, Europe, United Kingdom, North America and Brazil.

With a global expertise in logistics and business space, developed over the years from offering an integrated customer service (own+ develop+ manage) and an investment management platform, Goodman delivers unique property solutions to its clients.

With a market capitalisation of around $ 25.39 billion and ~ 1.81 billion outstanding shares, the GMG stock closed the market trading at AUD 14.290, climbing up 2.07% by AUD 0.290 with around 3.56 million shares traded on 7 June 2019.

Recently, Goodman Group disclosed its operational and financial results for the third quarter ended 31 March 2019 (Q3 FY19). During the three months, the Group delivered an impressive operational performance, as can be concluded from the figures posted.

Greg Goodman, Group’s CEO, explained that the structural trends of urbanisation suggest that rising consumerism and the ever-increasing need for convenience are driving the demand for industrial property in key urban areas.

For the nine months to 31 March 2019, the Group’s total assets under management stood at AUD 44.1 billion. There was 98% occupancy across the Group and Partnerships accompanied by a 3.3% like for like NPI growth in the managed Partnerships. Goodman has over $ 3.7 billion of development work currently underway.

The statistics for the Group’s three segments are illustrated below.

  1. Own: Leased 2,643,085 m2 across the platform over the period equating to $ 359 million of rent per annum.

Source: Q3 2019 Operational Update

 

  1. Develop: Development WIP of $ 3.7 billion across 69 projects with a forecast yield on cost of 7.1% at 31 March 2019.

Source: Q3 2019 Operational Update

  • Manage: Assets Under Management (AUM) in Partnerships of $ 40.8 billion, supported by revaluation gains, development completions and net acquisitions, as well as exchange rates.

Source: Q3 2019 Operational Update

Scentre Group

Sydney-based Scentre Group (ASX: SCG) is the owner and operator of Westfield in Australia and New Zealand with interests in 41 centres, encompassing about 11,500 outlets and total AUM of $ 54.2 billion. The company is engaged in the development, construction, design and operations as well as asset management and marketing of an intensive portfolio of retail real estate properties and shopping centres across Australia and New Zealand.

With a market capitalisation of around AUD 20.15 billion and around 5.32 billion outstanding shares, the SCG stock price edged up 1.32% to AUD 3.840, reflecting an intra-day gain of AUD 0.050 with approximately 6.37 million shares traded on 7 June 2019. The company’s annual dividend yield stands at around 5.85% to date.

On 20 May 2019, the Group informed the stakeholders that Perron Group will be a new 50 per cent JV partner in Westfield Burwood in Sydney. As per the company, Perron Group will make a $ 575 million payment to earn this stake, which depicts a 4.1% premium to Scentre Group’s book value as of 31 December 2018. According to Scentre Group’s CEO Peter Allen, the proceeds from the transaction will be directed towards meeting the Group’s strategic objectives and creating long-term value for shareholders. However, initially, the deal proceeds will be used for debt repayment.

Earlier this year, in February, Scentre Group had received an ‘A Stable’ credit rating from Fitch, acknowledging its premier asset portfolio, unique operating platform, stability of income and strong financial position.

In the 1st Quarter Operating Update for the three months to 31 March 2019, released on 1 May 2019, the Group reported that 99.3% of its portfolio were leased during the period, and around 448 Lease Deals were Completed (Lease Deals Completed Area 71,084 m2). Besides, the total lettable area was over 3.8 million m2 and the customer visits per annum increased over 535 million.

Source: Company’s 1st Quarter Operating Update 2019

 

Dexus

As one of the leading real estate groups in Australia, Dexus (ASX: DXS) is managing a high-quality Australian assets portfolio worth around $ 28.9 billion. The Group directly owns around $ 13.9 billion of office and industrial properties. In addition, it manages $ 15.0 billion of office, retail, industrial and healthcare properties for third party clients. With a $ 5.0 billion of development pipeline, the Group is well positioned to grow both portfolios and enhance risk-adjusted returns for investors.

Supported by ~ 27,000 investors from 19 countries, the Group’s market capitalisation stands at around AUD 14.65 billion, with approximately 1.1 billion of outstanding shares. On 7 June 2019, the DXS stock price settled the market trading at AUD 13.450, zooming up 0.67% by AUD 0.090 with over 2.09 million shares traded.

In addition, the DXS stock has generated positive return yields including 22.46% for the past six months and 27% YTD.

The Group released its North Shore Property Tour update on 5 June 2019. According to the information provided, Dexus is well leveraging capabilities to deliver profits.

Source: Company’s announcement dated 5 June’19

 

As per the business update, the New South Wales office markets continued to perform strongly.

Leasing statistics, Source: Company’s announcement dated 5 June’19

Considering the above figure, the prime net effective annual rental growth was the highest for Parramatta at 9.9%, followed by North Sydney at 9.3%.

Besides, the Group mentioned that the outlook for the North Sydney office market was positive, backed by solid economy and tight market conditions in the Sydney CBD. In addition, after minimal new supply in recent years, vacancy is expected to increase over medium term, with the entry of new supply in the market (100 Mount, 1 Denison).

Source: Company’s announcement dated 5 June’19

Moreover, on 3 June 2019, Dexus Funds Management Limited, as a responsible entity for Dexus, confirmed the successful completion of the non-underwritten Security Purchase Plan (SPP) to eligible Dexus securityholders in Australia and New Zealand to raise up to $ 50 million (as announced on 2 May 2019). The SPP closed oversubscribed at 5pm (Sydney time) on 29 May 2019, raising about $ 63.9 million.

While the institutional placement of $ 900 million announced on 2 May 2019, was concluded on 3 May 2019, for partially funding a 75% interest acquisition in 80 Collins Street, Melbourne. Approximately 74 million new Dexus stapled Securities were to be issued to institutional investors at a fixed price of $ 12.10 per New Security.

Vicinity Centres

Real estate player, Vicinity Centres (ASX: VCX) is another very well-known retail property group in Australia, with a fully integrated asset management platform and ~ $ 26 billion in retail AUMs (across 66 shopping centres). As a result, it is the second largest listed retail property manager in the country. The Group has a Direct Portfolio with interests in 62 shopping centres and manages 33 assets on behalf of Strategic Partners, 29 of which are co-owned by the Group.

With a market capitalisation of around AUD 9.81 billion and ~ 3.77 billion outstanding shares, the VCX stock price edged up 0.38 % to AUD 2.610, reflecting an intra-day gain of AUD 0.010, with ~ 8.11 million shares traded on 7 June 2019. Besides, the Group has an annual dividend yield of 6.21%.

On 4 June 2019, Vicinity Centres announced the appointment of new Chief Financial Officer (CFO), Mr Nicholas Schiffer. As a member of Group’s Executive Committee, Mr Schiffer, who will commence in the CFO role in September 2019, will report to the CEO and Managing Director, Mr Grant Kelley.

As per its March 2019 quarterly update, Vicinity Centres reported an active start to the calendar year with its new strategy in place.

Source: Company’s March 2019 quarterly update

As per the update, the Group recorded specialty store and mini majors moving annual turnover (MAT) growth of 3.3%, with specialty store MAT of $ 10,939 per sqm, up 10.3% over the past year. Vicinity progressed with its value-accretive development projects:

  • Chadstone – Hotel is scheduled to open in November 2019 and taking bookings. Valet parking now available, with construction underway of the link between hotel and shopping centre.
  • The Glen – Stage four on track for opening in August 2019 and apartment construction to start in May 2019.

Besides, Vicinity has completed around four solar projects and a further ten are underway, as part of Group’s solar investment program valued at $ 73 million. The Group acquired 91 million securities for $ 234 million at a 13.4% discount to December 2018 net tangible assets per security. The guidance for FY19 funds from operations (FFO) per security remains 18.0 -18.2 cents, while the distribution payout ratio is likely to be the upper end of 95% to 100% of adjusted FFO.


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