Are Real Estate Stocks An Investor’s Best Friends – DXS GMG SCG MGR GPT

The below mentioned companies reported a sound financial performance with growth across key metrics and delivery of decent dividends during the latest financial reporting period. Let us have a look at the performance of the companies in detail.

Dexus

Dexus (ASX: DXS) owns and develops high quality real estate assets and manages real estate funds on behalf of third-party investors.

Sale of North Shore Health Hub: The company recently updated that it has executed a contract to sell the North Shore Health Hub to Healthcare Wholesale Property Fund. Stage 1 of the hub is currently under development and is expected to create trading profits for the company in FY20 and FY21. Expected contribution from the sale will be approximately $18 million – $22 million in the form of pre-tax trading profits.

Key Financial Highlights for the year ended 30 June 2019:

  • In FY19, the company reported growth of 5.5% adjusted funds from operations per security at 50.3 cents.
  • Distribution per security witnessed growth of 5.0% at 50.2 cents.
  • Net profit after tax was reported at $1.28 billion, down 25.9% on FY18 on account of net revaluation gains of investment properties which were lesser than in the prior corresponding period.
  • The company’s office portfolio reported an increase in the occupancy rate from 96.0% in FY18 to 98.0% in FY19. Growth was supported by leasing in the largest core market of the company.

Dexus’ Office Portfolio (Source: Company Reports)

FY20 Guidance: For the year ending 30 June 2020, the company expects to deliver distribution per security growth of approximately 5%. The company has a group development and concept pipeline of approximately $9.3 billion that will offer long-term value to the business.

The stock of the company generated negative returns of 7.52% and 8.93% over a period of 1 month and 3 months, respectively. The stock closed at a market price of $12.150 on 02 October 2019.

Goodman Group

Goodman Group (ASX: GMG) is a global integrated property group which manages property and business space in key markets around the world.

FY19 Financial Results:

  • During the year ended 30 June 2019, the company reported operating profit amounting to $942.3 million, representing an increase of 11.4% on prior corresponding period.
  • Statutory profit for the period was reported at $1,627.9 million.
  • During the year, the company reported operating earnings per share amounting to 51.6 cents, rising 10.5% on FY18.
  • Distribution amounted to 30.0 cents per stapled security, increasing 7% on prior corresponding period. Net tangible assets per security stood at $5.34, rising 15% since 30 June 2018.
  • Distribution for the six months ended 30 June 2019 amounted to 15 cents per security.

FY19 Key Metrics (Source: Company Presentation)

Total assets under management at the end of the period stood at $46.2 billion, representing an increase of 21% on FY18. In addition, the period was marked by significant valuation uplift of $3.8 billion across the group and partnerships. The company reported management earnings growth of 48% and average partnership total returns of 16%.

FY20 Guidance: In FY20, the company expects to report operating profit amounting to $1,040 million, up 10.4% on FY19. Operating EPS for the period is expected to be 56.3 cents, representing an increase of 9% in comparison to FY19. Distribution for the year is anticipated to be 30.0 cents per security.

The stock of the company generated negative returns of 2.34% and 6.83% over a period of 1 month and 3 months, respectively and has a market capitalisation of $26.44 billion. The stock closed at a market price of $14.340 on 2 October 2019.

Scentre Group

Scentre Group (ASX: SCG) owns and operates a retail property portfolio in Australia and New Zealand. On October 1, 2019, the company bought back a total of 16,083,597 shares for a total consideration of $63.31 million. The company will buy back shares for a total consideration amounting to $8 billion.

Key financial Performance for the half-year ended 30 June 2019:

  • During the first half-year ended 30 June 2019, the company generated revenue amounting to $1,302.9 million, rising 1.6% in comparison to prior corresponding period (pcp) revenue of $1,282.2 million.
  • Profit after tax for the period went down by 49.4% at $740 million, as compared to a profit of $1,462.6 million in pcp.
  • Funds from operations attributable to members were reported at $676.2 million, representing an increase of 2.9% on pcp value of $657.2 million.
  • Dividend paid to the shareholder amounted to 11.30 cents per stapled security, paid on 30 August 2019.

1H19 Results (Source: Company Presentation)

Segment Performance: During the first-half of 2019, revenue for the property investment segment was reported at $1,194.9 million as compared to prior corresponding period revenue of $1,157.7 million. Revenue for the Property management and construction segment stood at $185.0 million, as compared to prior corresponding period revenue of $206.2 million.

Geographical Update: Australia contributed a large chunk of the property revenue in the first half-year, amounting to $1,144.4 million. Revenue from New Zealand stood at $50.5 million in the first half-year. Property development and construction revenue from Australia amounted to $76.2 million and that from New Zealand stood at $108.8 million.

Outlook: Funds from operations per security in FY19 are expected to report an approximate growth of 0.7%. The company did not take into account the positive impact of the security buy-back program while forecasting growth for FY19. Distribution for FY19 is anticipated to be 22.60 cents per security, representing an increase of 2% on prior year.

The stock of the company closed at a market price of $3.940 on 02 October 2019.

Mirvac Group

Mirvac Group (ASX: MGR) is involved in real estate investment. Third party capital management and property asset management are also the company’s activities.

Key Financial Results for the year ended 30 June 2019:

  • Operating profit for the year amounted to $631 million, up 4% in comparison to prior corresponding period profit of $608 million.
  • Return on Invested Capital for the group was reported at 10.1%.
  • The period was marked by strong uplift of $516 million in net property revaluation across the investment portfolio.
  • Net tangible assets per stapled security for the period were reported at $2.50, as compared to $2.31 in prior corresponding year.
  • Operating cashflow for the period stood at $518 million, as compared to $663 million in pcp.

Financial Results (Source: Company Presentation)

The stock of the company generated negative returns of 4.08% and 3.16% over a period of 1 month and 3 months, respectively. The stock closed at a market price of $3.100 on 02 October 2019.

GPT Group

GPT Group (ASX: GPT) owns and manages a diversified portfolio of retail offices, shopping centres and business parks across Australia.

Interim Results: During the six months ended 30 June 2019, the company reported net profit after tax amounting to $352.6 million, down 51.6% on prior corresponding period. Funds from operations amounted to $295.9 million, representing FFO per security growth of 2.0% on prior corresponding period. Net tangible assets for the period amounted to $5.66 per security, rising 1.4% on 31 December 2018.

Financial Summary (Source: Company Presentation)

During the first half, the company completed a placement of $800 million. In addition, the period also saw the launch of a Security Purchase Plan for logistics growth opportunities and funding the acquisition of a property in Sydney. Distribution for the period amounted to 13.11 cents per security, rising 4.0% on prior corresponding period.

FY19 Guidance: In FY19, funds from operations per security are expected to grow at a rate of 2.5% in comparison to FY18. Distribution per security for the year is expected to reported growth of 4.0%.

The stock of the company generated negative returns of 3.60% and 0.16% over a period of 1 month and 3 months, respectively. The stock closed at a market price of $6.170 on 02 October 2019.


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