Property stocks with double-digit growth in the last 12 months

Property stocks with double-digit growth in the last 12 months

The year 2019 witnessed a revival in Australia’s property market, backed by improved lending conditions and lower interest rates. The reduced interest rate and its sustainability will help create a positive outlook and lead to a further rise in property prices in 2020.

According to a recent announcement, ABS reported a growth of 4.4% in the new loan commitment value for housing in December 2019.

As per the World Bank’s ‘Doing Business Report 2020’ ranking 190 economies around the globe, Australia is ranked 11th on the parameter for ‘Dealing with Construction Permits’. Also, in the parameter ‘Registering Property’, Australia is ranked 42nd. These parameters consider the number of procedures, cost and time to transfer a property and to complete all formalities to build a warehouse. Moreover, it considers safety mechanisms and the quality control in the construction permitting system and land administration system.

Let’s have a look at three property stocks: LLC, HPI and CQR; their businesses, announcements and the change in stock price observed based on various important updates.

Lendlease Group (ASX:LLC)

An ASX-listed company, Lendlease Group, is into the business of construction, investments and development for building places to live, work, enjoy and connect. The company has delivered several projects of cultural, public and social significance, including National September 11 Memorial & Museum, Sydney Opera House, renovation of National Theatre and London’s Tate Britain.

LLC was incorporated in Sydney in 1958, and it operates in four regions, namely the Americas, Asia, Australia and Europe.

Also Read: 6 Property Space Stocks to Look At - LLC, DHG, REA, BKW, JHX, BLD

LLC’s strong financial position in HY2020:

LLC released its HY2020 (ended 31 December 2019) on 20 February 2020. Key developments include:

  • Net tangible assets per security were $8.93 in December 2019, up from $8.69 in June 2019
  • Group PAT was $313 million and earnings per security (stapled) of 55.5 cents.
  • Return on Equity of 9.8%.
  • The company’s Commercial REIT gets listed in Singapore.
  • Funds Under Management was $37 billion, an increase of 8% pcp.

For the six-month ended 31 December 2019, Lendlease declared a dividend distribution of 30 cents per share which is not franked. The record date is 28 February 2020, followed by the payment date, 17 March 2020.

Stock Performance of LLC on the release date of HY2020 results: On 20 February 2020, the stock of Lendlease was trading at $18.64, an increase of 6.942% from its previous closing price. The stock of the company had generated positive returns of 16.12% and 25.67% in the period of 6 months and one-year, respectively.

LLC to Divest its Engineering Business for $180 million:

On 19 December 2019, LLC notified the market that it had signed an agreement with Acciona Infrastructure Asia Pacific to sell its engineering business for $180 million. The deal was a key milestone for the company, which is focusing on achieving its target of delivering more than $100 billion global development pipeline. Subject to the regulatory approvals and consents from third party and client, the transaction is expected to close in the first half of CY2020.

As per the agreement, two of the projects, namely, Kingsford Smith Drive and NorthConnex, would be excluded from the sale agreement. These projects will be finalized by LLC. In addition to these projects, the Melbourne Metro Project has been excluded from the agreement. Melbourne Project is undertaken by a JV including John Holland, Bouygues Construction and Lendlease Engineering.

Stock performance on 19 December 2019: LLC’s stock traded at $18.88, up by 0.21% as compared to the previous closing price.

Hotel Property Investments (ASX:HPI)

The ASX-listed Hotel Property Investments maintains a portfolio of freehold properties including hotels and associated specialty tenancies, spread across South Australia and Queensland.

The company has leased its pubs to Australian Leisure & Hospitality (ALH) and Queensland Venue company (QVC). Around 93% of the company’s income is generated from the pubs leased to ALH and QVC. QVC is a joint venture (JV) between Australian Venue company and Coles group. ALH is a JV with Woolworths group owning 75% of the company.

HPI delivered impressive results in H1 FY2020, rent revenue up 9.21%

For the six months ended 31 December 2019, HPI reported rent revenue of $24.683 million from investment properties, an increase of 9.21% on pcp. The company had a fair value gain of $5 million on investment properties.

Other key highlights include:

  • Total revenue grew by 9.3% pcp, from $24.8 million to $27.1 million.
  • Net Tangible Assets per security was $2.96 as on 31 December 2019 as compared to $2.93 as on 30 June 2019.
  • Group’s profit after tax (PAT) was reported at $20.4 million.
  • Adjusted Funds from Operations was $15.1 million, an increase of 5.6%
  • As on 31 December 2019, Group's net assets were $434.1 million indicating the net assets per stapled security of $2.96.
  • Interim trust distribution amount was 10.3 cents per stapled security, up from 9.8 cents in pcp. For determining entitlements to trust distribution, the record date was 31 December 2019, while the payment date for trust distribution is 04 March 2020.
  • Total distribution payable for six months period amounted to $15.1 million, an increase of 5.51% on pcp.

FY2020 Outlook of secure income stream to investors:

  • The company reiterated its Distribution Guidance for FY2020 as 20.7 cents per security.
  • HPI focuses on increasing current onsite accommodations and looking for opportunities to generate new income sources on underutilised land.

HPI’s Stock performance on result announcement date for 1H FY2020:

On 20 February 2020, the stock of HPI last traded at $3.46, down 0.575%. The company had a market capitalisation of around $510.57 million. The total outstanding shares of the company stood at 146.72 million.

The stock had delivered positive returns of 0.29% and 10.19% in the last six months and one year, respectively.

Charter Hall Retail REIT (ASX:CQR)

Charter Hall Retail REIT owns and manages a portfolio of convenience-based retail worth $6.9 billion in Australia. Charter Hall Group (ASX:CHC) manages CQR.

Interesting Read: Best of the Yields - Australia's REITs under Spotlight

The increased stake of CQR in BP Partnership Fund:

On 20 February 2020, Charter Hall Group (ASX: CHC) notified the market that it had sold its 17.5% stake in the BP Partnership to Charter Hall Retail REIT for around $77 million.

In 2019, the BP Partnership was formed to acquire an $840 million interest in a portfolio of BP leased retail assets. At that moment, the BP Partnership was owned 20% by CHC, 30% by CQR and 50% by Charter Hall Long WALE REIT (ASX: CLW).

Post the announcement mentioned above the BP Partnership will be operated as a JV between CQR and CLW. Thereby taking CQR's total interest in the BP Partnership Fund to 47.5%.

Also, the company would undertake a fully underwritten institutional placement to raise $90 million at an issue price of $4.81 per unit. This placement will be used to fund the BP Partnership acquisition.

Trading Halt:

The company wished to halt the trading of its stock, either until announcement issued to the market or beginning of normal trading on 24 February 2020, whichever is earlier.

Release of half-year FY2020 Results:

The company came out with its first half FY2020 results for the period ended 31 December 2019.

  • Interim distribution of 14.52 cents per unit amounts to $64.3 million and payable on 28 February 2020.
  • Operating earnings stood at $70.2 million, up from $62.8 million on pcp.
  • Statutory profit was $66.7 million, an increase of 20.18% pcp.
  • Revenue grew by 6.16% pcp, from $100.6 million to $106.8 million.
  • Net profit after tax was $66.7 million, up from $55.5 million pcp
  • Total assets increased by 3.7%, from $2,908.3 million to $3,015.8 million.
  • The net tangible asset backing per unit was 4.09 as on 31 December 2019.

FY2020 Guidance:

  • The company increased operating earnings growth per unit guidance to 2.3% over FY19. The increase relates to CQR’s increased investment in the BP Portfolio.
  • Distribution payout ratio is expected to be in the range of 90 to 95% of operating earnings.

Stock performance of CQR:

On 20 February 2020, the stock of CQR traded at $5.05. The company had a market capitalisation of $2.23 billion and total outstanding shares stood at 442.54 million.

The stock of the company had generated positive returns of 16.12% and 25.67% in the period of 6 months and one-year, respectively.

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