5 Property stocks - ABP, SCG, INA, NSR, LIC

The Real Estate index, which was on a growth streak on the ASX for five consecutive days till 17 February 2020, slipped down on Tuesday’s (18 February 2020) trade with a fall in some of the stocks constituting the real estate index.

Several real estate players released their financial results for the period ended 31 December 2019 and the effects were seen on the stock performance and the overall index results at the end of the day.

With the S&P/ASX 200 falling by 0.16% on 18 February 2020, the S&P/ASX 200 Real Estate (Sector) also dipped 0.23% and settled at 3,989.5 during the day.

However, on 19 February 2020, both the indices recovered and settled in the green zone:

• S&P/ASX 200 settled at 7,144.6 with a gain of 0.43%.
• S&P/ASX 200 Real Estate (Sector) gained 0.33% and settled at 4,002.7.

Let us discuss some of the property stocks listed on the ASX.

Abacus Property Group (ASX:ABP)

A diversified property group that operates predominantly in Australia, Abacus Property Group engages in investments in self-storage, office and commercial (retail and industrial) properties to derive rental and fee income, and participation in property developments to obtain interest income and development profits.

The company released its 1H FY20 results on 18 February 2020 with the following numbers recorded during the period:

• Group statutory profit declined 36% and stood at $82.1 million in HY20 compared to $127.8 million in HY19.
• Abacus Funds from Operations were up 3% at $67.3 million compared to $65.3 million in HY19.
• FFO per security was down 6% from 11.27 cents in HY19 to 10.59 cents.
• Distribution per security (DPS) was up by 2.2% at 9.45 cents.
• Net tangible assets (per stapled security) were up 2.4% at $3.41.

During the six months ended 31 December 2019, the company acquired (or contracted to acquire) over $600 million of business altering investments and has expanded exposure to its principal focus sectors of Self-Storage and Office via a string of acquisitions and joint ventures.

Abacus remains positive on its outlook and market differentiated AREIT positioning in the Self-Storage and Office sectors. The company believes the amalgamation of cautious investment and active management in the two sectors will drive attractive risk-adjusted returns for the stakeholders in the medium to long term.

The ABP stock closed the day’s trade on 20 February 2020 at $4.030, down 0.248% with a market capitalisation of $2.61 billion.

Scentre Group (ASX:SCG)

Owner and operator of well-known living centre portfolio in Australia and New Zealand, Scentre Group has retail real estate AUM worth $56.0 billion and has Funds from Operations (FFO) amounting to $1.345 billion.

The company announced the following results for FY2019:

• Revenue was noted at $2,616.1 million, down 0.7% on pcp.
• Profit after tax attributable to members of Scentre Group stood at $1,179.5 million, down by 48.4%.
• Funds from operations (FFO) attributable to members of Scentre Group were up 0.4% at $1,344.6 million.
• Dividend/distributions for the year ended 31 December 2019 was 22.60 cents per stapled security.

The number of annual customer visits crossed 548 million. The steady performance has been a result of the company’s portfolio strength, coupled with its leading operating platform, representing an increase of more than 12 million visits.

Scentre is currently and continuously engaged in innovating the ways to engage with its customers and employing new technologies to enhance its direct engagement with the consumer.

The Scentre Group’s business has endured through 60 years to continually adapt to be at the forefront of consumer change.

During the year:

• The company released $2.1 billion of capital from the divestment of the Sydney Office Towers and the joint venturing of Westfield Burwood.
• The company acquired a 50% interest in Westfield Booragoon in Perth for $570 million and became the long-term property and development manager for the centre.

The SCG stock settled the day’s trade on 20 February 2020 at $3.730, up by 0.811% with a market capitalisation of $19.38 billion.

Ingenia Communities Group (ASX:INA)

Ingenia Communities Group owns and operates a varied portfolio of communities focusing on Australian senior citizens. The company portfolio includes Lifestyle, Holidays and Gardens communities.

Ingenia recently announced its results for the half-year ended 31 December 2019 with the following highlights:

• Revenue stood at $116.9 million, representing an increase of 25% over 1H19.
• Robust operating cash flow of $27.2 million, representing an increase of 60% on 1H19.
• EBIT increased by 40% on 1H19 and stood at $32.2 million.
• Underlying EPS increased by 32% on 1H19 and stood at 10.7 cents.
• Settlement of 140 new homes, indicating an increase of 22% on 1H19.
• Nine projects under development with one new project to commence in April 2020.
• Capital base expanded with a new $100 million 7-year debt facility and funds management platform.

The company’s Underlying Profit of $26.5 million for the half-year ending 31 December 2019, witnessed an increase of 52% on the pcp, while statutory profit of $23.6 million was up 81%.

Post the purchase of two established communities in the first half, Ingenia believes it has opportunities to acquire existing assets. It announced the acquisition of an attractive community, Lake Munmorah Residential Resort, which further develops its presence in the NSW Central Coast.

The INA stock closed the day’s trade at $5.210 on 20 February 2020, in line with the previous day’s closing price, and had a market capitalisation of $1.41 billion.

National Storage REIT (ASX:NSR)

As one of Australasia’s leading self-storage providers, National Storage REIT offers several tailor-made solutions to residential and commercial customers. The company, created in 2000, was listed on the ASX in December 2013.

The company recently acknowledged the receipt of:

• An unsolicited confidential non-binding indicative proposal from Warburg Pincus for 100% of its issued stapled securities for a cash price of $2.20 per stapled security through an inter-conditional company and trust schemes.
• On 14 February 2020, an unsolicited nonbinding indicative proposal was made from Public Storage to purchase 100% of NSR’s issued stapled securities for a price of $2.40 (per stapled security) through an inter-conditional company and trust schemes.
• The company had announced on 23 January 2020 that a confidential non-binding indicative proposal had been made from Gaw Capital Partners (GAW) to acquire 100% of the company’s issued stapled securities.

Upon careful consideration of the Warburg Pincus indicative proposal, the NSR Board resolved to provide Warburg Pincus with access to non-exclusive due diligence. The two parties entered into a confidentiality agreement to facilitate Warburg Pincus being provided with access to material non-public information concerning NSR.

Both Warburg and GAW are presently conducting their non-exclusive due diligence separately including review of confidential information provided by NSR and is in discussions with the NSR management and its advisors.

The company is working closely with the three parties about the proposals to acquire NSR. At present, the discussions are in an initial stage and are subject to several conditions.

The NSR stock settled at $2.410 on 20 February 2020, up 8.333% with a market capitalisation of $1.89 billion.

Lifestyle Communities Limited (ASX:LIC)

Melbourne based developer, owner and manager of affordable independent living residential land lease communities, Lifestyle Communities Limited, achieved a net profit after tax attributable to shareholders of $15.1 million for the first half of FY2020, compared to $21.9 million in the pcp.

The company believes that currently, nearly all its projects remain on track to meet their long-term settlement and completion targets.

Moreover, the growing number of homes under management led to the growth in annuity income from core operations to $13.8 million in the first half of FY20 as compared to $11.1 million in the first half of FY19.

The company’s balance sheet looks well-positioned to provide for future growth and the company shall continue to apply its disciplined site selection process in a few opportunities that are currently in the pipeline.

As of 31 December 2019, the company had settled 2,393 homes with 3,492 homeowners living in its 20 communities.

Entering the second half of the year, the company looks well-equipped with enough forward sales to meet its settlement guidance. Also, the company recently acquired new sites in St Leonards and Pakenham and continue to investigate site opportunities in Melbourne’s key growth corridors.

The company shareholders are expected to receive an interim fully franked dividend of 3.0 cents per share, with a record date of 6 March 2020 and a payment date of 3 April 2020.

The LIC stock closed the day’s trade on 20 February 2020 at $9.040, down 1.418% with a market capitalisation of $958.68 million.

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