Australian Real Estate Stocks To Watch Out For- GMG, URW, SGP, LLC

  • Feb 28, 2020 AEDT
  • Team Kalkine
Australian Real Estate Stocks To Watch Out For- GMG, URW, SGP, LLC

As world prepares for the worst with rising coronavirus cases, confidence levels of investors have tumbled down sharply with the markets facing global sell-off. With swift US market correction, and S&P ASX 200 dipping below $2 trillion mark, the market dynamics are severely hit.

The 10-year-bond yields are at record lows in the economy. Besides, unemployment and wage level data also present challenging labour market scenario. Market participants are expecting rate cuts in June.

Investors are closely eyeing real estate sector, on recovery mode since some time. The sector is likely to get further boost from the upcoming anticipated rate cuts. Moreover, the sector is believed to be safe haven for investors when it comes to offering relatively stable dividend flow, thereby enhancing passive income.

In this backdrop, Let us look at some of the retail sector stocks-

Goodman Group (ASX: GMG)

  • Strong Performance in 1H 2020 & Raised 2020 Earnings Outlook: Goodman Group, a property group that is into commercial and industrial (like logistics and business) segment, is involved into investment of property, management of funds, development of properties and property services.

The company also operates in New Zealand, UK, Asia and Europe apart from Australia.

 

GMG, for the first half of 2020, has reported 14.1% increase in the operating profit to $530.4 million, and 12.9% growth in the operating earnings per share (EPS) to 28.8 cents. The company declared the statutory profit for 1H 2020 of $810.6 million, which represents the decrease compared to $929.2 million in 1H 2019.

During the first half of 2020, the company has increased the assets under management by 15% to $49.2 billion. The company’s development work in progress (WIP) has increased to $4.3 billion compared to $3.6 billion in 1H 2019. The WIP reflects 55 projects in 15 countries with a projected yield on cost of 6.5% and the company expects it to exceed $5 billion.

Moreover, the company has raised its forecast for FY20 and projects EPS to be of 57.3 cents per security, which represents the growth of 11% on FY19 and confirms its forecast for full year 2020 distribution to be of 30 cents per share.

1h fy20 financial performance

Meanwhile GMG stock is trading at a P/E of 18.735x. The company will be paying dividend of 15 cents on February 25th, 2020. The stock traded at $14.920, down 4% on 28 February (3:10 PM AEDT).

Unibail-Rodamco-Westfield (ASX: URW)

  • URW through new JV is acquiring five French shopping centres: Unibail-Rodamco-Westfield is originally an European commercial real estate company that has headquarters in Paris, France but had acquired Australian company Westfield Corporation, which was shopping centre operator. After this acquisition, the portfolio of shopping centres owned by Unibail-Rodamco was modified into the Westfield brand.

 

URW through a new JV between the company & the Consortium (formed by leading French investors Crédit Agricole Assurances and La Française) in the ratio of 45.8:54.2 will acquire five French shopping centres, comprising of Aéroville, So Ouest, Rennes Alma, Toison d’Or and Confluence.

The implied offer price for these assets at 100% is of €2,037 Mn and the net proceeds to URW are projected to be an aggregate of €1.5 Bn. This deal is anticipated to close towards the end of the second quarter of 2020.

Moreover, the company expects Adjusted Recurring Earnings per Stapled Share (“AREPS”) for fiscal 2020 to be in the range of €11.90 - €12.10. The company for FY 19 has reported AREPS to be of €12.37, which exceeded the guidance of €12.10 - €12.30.

Meanwhile URW stock has fallen 18.76% in three months and is trading at a P/E of 14.81x. The stock traded at $9.150, down 3.1% on 28 February (3:10 PM AEDT).

Stockland Corporation Ltd (ASX: SGP)

  • 68% Uptick in Reported Profit, Outlook for FY 2020: Stockland Corporation Ltd is a leading player in real estates that have in their portfolio shopping centres, housing estates, industrial estates and retirement villages.

 

SGP for fiscal 2020 expects FFO per security to be of 37.4 cents, and distribution per security is expected to be of 27.6 cents, with distribution payout anticipated to be at the lower end of the target ratio of 75-85 per cent.

 

Further, for full year 2020, communities business is projected to deliver more than 5,200 residential settlements and more than 850 settlements across retirement living. The profits from these two segments are expected to be in the second half of 2020 as seen historically.

 

On the other hand, the company for the first half of 2020 has reported 68.1% rise in the statutory profit to $504 million on 1H19 and 4.2% decline in the Adjusted funds from operations (AFFO) to $338 million. Funds from operations (FFO) declined by 5.6% to $384 million in 1H 2020 with 4.2% decline in FFO per security to 16.1 cents.

SGP's half yearly update

Meanwhile, SGP has an annual dividend yield of 5.67% and will be paying dividend of 13.5 cents on February 28th, 2020. The stock traded at $4.695, down 3.6% on 28 February (3:10 PM AEDT).

Lendlease Group (ASX: LLC)

  • 3% rise in the Profit after Tax in 1H 2020: Lendlease Group is an Australia based real estate company that has presence in many countries and is into construction, development of property and infrastructure business.

 

LLC, for the for the first half of 2020, has reported the 1856.3% rise in the Profit after Tax to $313 million, 4.6% fall in the revenue to $7,403 million, with increase in earnings per security to 55.5 cents and a Return on Equity of 9.8 per cent.

LLC'S half yearly update

Moreover, the company has signed an agreement to divest the Engineering business for $180 million and the transaction is anticipated to close in the second half of 2020.

For 1H 2020, the company posted the Development ROIC of 7.3%, which is below the target range of 10 – 13%. The Development segment performance was driven due to the formation of the joint venture for delivering the Victoria Cross Over Station Development, Sydney.

In the Construction segment, the business delivered the EBITDA margin of 2.3%, which is within the target range of 2-3%, though the earnings were lower than the prior corresponding period.

 In Investments, the company posted the ROIC of 10.7%, which is at the top end of the target range 8 – 11% on the back of growth in funds under management and the performance fee.

Meanwhile LLC stock is trading at a P/E of 13.41x and annual dividend yield of 3.29%. The company will be paying dividend of 30 cents on March 17th, 2020. The stock traded at $17.630, down 3.34% on 28 February (3:10 PM AEDT).

The real estate space, although offering opportunities to beef up portfolio’s return amidst property market recovery and rate cut projections, needs to be thoroughly investigated with closer look at company’s fundamentals and future outlook.


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