Property stocks amidst real estate recovery – A look at CIM, CMW, CMA

Property stocks amidst real estate recovery – A look at CIM, CMW, CMA

The performance of the real estate sector is correlated with multiple factors including lower interest rates, ease in loan serviceability, growth in population, and increase in real income, among others. These factors have an impact on the buying sentiment in the property market. As witnessed recently, the sector has performed well in 2019, following a difficult market scenario. The recovery was driven by factors including improved lending scenario and lower interest rates.

To capture the stock performance of this sector, a separate index, S&P/ASX 200 Real Estate was formed to cater to the top real estate performers listed on S&P/ASX 200.

On 07 February 2020, S&P/ASX 200 Real Estate last traded at 3,916.80 points. The index delivered positive returns of 2.25 and 3.55 per cent in the last six months and one-month respectively.

Let’s screen three companies in the real estate sector and have a look at their recent updates and financial performance.

CIMIC Group Limited (ASX:CIM)

An ASX-listed company, CIMIC Group Limited, is into the business of property and building, engineering, mining, construction, public-private partnerships and services. CIMIC is listed on various exchanges and is a member of the Dow Jones Sustainability Australia Index, the S&P/ASX 100 index and FTSE4Good. The company was founded in 1899 and has a presence in nearly 20 countries with 40,000 employees.

CIM has different business arms including,

  • CPB Contractors deals in the construction business and comprises of two contractors, namely Leighton Asia and Broad
  • Thiess and Sedgman are two companies dealing in mining and mineral processing business respectively
  • UGL is a specialist in providing services in asset solutions
  • Pacific Partnerships deals in public-private partnerships
  • EIC Activities caters to technical services and engineering business

All these business arms are backed by the Company’s in-house consultancy for engineering activities.

Selection of CPB Contractors for highway projects:

On 06 February 2020, CPB Contractors, catering to the construction business of CIM, announced that it had been selected for upgrading the regional highway projects by two different entities. These two projects are worth $164 million of revenue, contributing to CPB Contractors financial statements.

  • Upgrade of South Gippsland Highway: This highway is located between Meeniyan and Koonwarra in Victoria. Victorian and Australian governments are funding this project. The realignment of the highway aims to deliver more secure journeys, thereby enhancing the drivers’ safety.
  • Upgrade of Mackay Northern Access: Location of this project is Mackay Queensland and is sponsored by Queensland and Australian governments. The project aims to ease the traffic congestion on Bruce Highway by adding additional capacity in the north of Mackay, thereby, improving the traffic efficiency. Further, it also considers to be more sustainable for covering up with the growing population

Financial results FY 2019: The Company released its financial results on 04 February 2020 with stable revenue and an increase in profit before tax. Some of the key highlights are as mentioned below:

  • Revenue incurred from all the business operations was $14.7 billion, and Mining & Minerals processing was the best performing segment with a 13.4 per cent growth over last year.
  • NPAT was noted at $800.3 million in FY 2019 as compared to $778.5 million in FY18, an increase of 2.8 per cent.
  • Operating cash flow (pre-factoring) increased by 159 per cent y-o-y basis, from $0.658 billion to $1.7 billion. Also, the company delivered 80 per cent EBITDA cash conversion with no change in factoring level.
  • As at December 2019, net cash with the Company was $831.6 million.

FY 2020 Guidance:

  • Subjected to market conditions, NPAT is expected to be in the range $810 million to $850 million

Stock performance on the day of the financials release: CIM stock was trading at $28.17, a decrease of 0.84 per cent compared to the previous day’s closing price.

Stock Performance of CIM:

On 07 February 2020, the stock of CMW last traded at $28.540, a decline of 4.867% compared to the previous day’s closing price. The company had outstanding shares of approximately 323.72 million, and a market capitalisation of nearly $9.71 billion. The 52 weeks low and high price of the stock were $27.800 and $51.500, respectively. The stock delivered negative returns of 11.24 per cent and 35.84 per cent in the last six months and last 12 months, respectively.

Cromwell Property Group (ASX:CMW)

Cromwell Property Group, an ASX-listed real estate investment company, has AUM of $11.9 billion (as at 30 June 2019) with more than 270 properties and nearly 3,800 tenants. CMW has a global presence covering 15 countries with more than 420 employees in 30 offices worldwide, including Australia, Europe and New Zealand.

Reshuffling of Management & Strategy review:

On 04 February 2020, Cromwell notified the market that Mr Geoffrey H Levy would retire from his position of Chair and Director. Mr Levy will be replaced by Mr Leon Blitz, who is currently the Deputy Chair in the organisation. Also, Mr Andrew Fay will step into the role of Deputy Chair. These changes are applicable from 26 February 2020 after the end of the Board meeting.

Also, the Company states that its first half-year results FY 2020 will be released on 27 February 2020, wherein, the changes in board members and strategic review will be mentioned.

Update on Dividend distribution:

On 31 January 2020, CMW announced an update on its dividend distribution of $0.01875 which is not franked.

Takeovers Panel declines further proceedings:

On 03 January 2020, the Australian Takeovers Panel stated that it had dropped the plan to conduct the proceedings in relation to CMW’s affairs. The panel mentions the reason for this decline in further proceedings was the insufficient material that was submitted by Cromwell.

Stock Performance of CMW:

On 07 February 2020, the stock of CMW last traded at $1.210, in line with the previous day’s closing price. The company had outstanding shares of approximately 2.61 billion, and a market capitalisation of nearly $3.15 billion. The 52 weeks low and high price of the stock were $1.057 and $1.345, respectively. The stock delivered positive returns of 3.42 per cent and 12.04 per cent in the last six months and last 12 months, respectively.

Centuria Metropolitan REIT (ASX:CMA)

Centuria Metropolitan REIT is an investment manager which provides a diverse range of products & services for its advisers, investors and shareholders. CMA had $7.2 billion of AUM, as at 18 December 2019. The Company focuses on two main areas, Centuria property funds management and Centuria investment bonds.

CMA is managed by CPFL (Centuria Property Funds Limited) as its responsible entity. Centuria Capital Group (ASX:CNI) has CPFL as its wholly-owned subsidiary.

Change of Company Name and ASX Ticker Code:

On 7 February 2020, Centuria Property Funds Limited notified the market that the name and ASX trading code of Centuria Metropolitan REIT had been changed. The new name will be Centuria Office REIT, and thus, the new code is modified to COF, in effect from 10 February 2020.

Reason pertaining to this name change is that the Company currently owns office assets unlike before when it owned both industrial and office assets at the time of its first listing on ASX in 2014. The new name thereby better replicates the Company’s current status.

Release of Interim Financial Report:

On 05 February 2020, CMA released its half-yearly report FY 2020 for the period ended 31 December 2019. Mentioned below are the key highlights.

  • Statutory net profit increased by 68 per cent y-o-y basis, with $24.7 million in H1 2020 as compared to $14.7 million in H1 2019.
  • Total assets were $2,144.3 million, and net tangible assets were $2.57 per unit, which is an increase of 8 cents per unit for the same corresponding year.
  • Funds from operations (FFO) was $39 million and per unit FFO was 9.6 cents per unit
  • Return on equity increased over the previous corresponding year, with 11.2 in HY 2020 and 10.9 in HY 2019.

Stock performance on the day of release of financials: CMA stock was trading at $2.95, an increase of 0.3 per cent as compared to the previous closing price.

Stock Performance of CMA:

On 07 February 2020, the stock of CMA last traded at $ 3.01, an increase 1.007 per cent compared to the last day’s closing price. The outstanding shares were approximately 514.52 million, and the market capitalisation was nearly $1.53 billion. The 52 weeks low and high price of the stock were $ 2.360 and $ 3.270, respectively. The stock delivered positive return of 6.88 per cent and 25.21 per cent in last six months and last 12 months.

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