Vicinity Centres (ASX: VCX) is Australia’s leading retail property groups with A$27.7 billion in retail assets under management. It has 66 shopping centres, as at 20 December 2018, in its portfolio with direct interests in 62 shopping centres and a gross lettable area of 2.8 million square metre. It has 14 centres in New South Wales, 12 in Queensland, 4 in Adelaide, 2 in Tasmania, 21 in Victoria, and 13 in Western Australia making VCX as the second largest listed Australian property retailer. Further, it is managing 32 assets on behalf of Strategic Partners, 28 of which are co-owned by the Group.
Today, VCX has provided an update over the December 2018 valuation of its retail properties. Out of its 62 directly-owned retail properties, 38 properties were independently valued while the remaining properties were valued internally. The valuation resulted in a drop in the value of the overall portfolio by A$37 million or a 0.2% fall in six months. Although the valuations are subject to final audit review and will be confirmed in the interim results of FY19. VCX will announce its 1H 2019 results on 15 February 2019.
Its flagship portfolio consists of DFO (Outlet) centres, Chadstone Shopping Centre, and premium CBD assets. The overall flagship portfolio went up by A$169 million or 2.4% in the period driven by the compression of capitalization rate by 4 basis points.
The Chadstone Shopping Centre was valued at A$3.15 billion with a gain of 1.4% or A$42.4 million during the six months. It incorporated Australia’s first Victoria’s Secret flagship store and other new luxury retailers.
The DFO assets also contributed a valuation gain in the first half of FY19. The growth was driven by strong income growth along with the firming of capitalization rate. The DFO South Wharf was up by 7.4% or A$48.4 million, the DFO Homebush was up by 7.1% or A$34.3 million, and the DFO Perth was significantly up by 40.4% or A$30.7 million.
There were dips in the valuation of Regional, Sub Regional and Neighbourhood centres by 2.6%, 1.6%, and 5.7% respectively. This was largely driven by recent market transactional evidence and the softening in capitalization rates.
The net tangible assets per security (NTA) was estimated to be A$2.96 as at 31 December 2018, with a fall of 1 cent, or 0.3% as compared to A$2.97 reported as at 30 June 2018. Gearing is also expected to improve and go down by 1.3% to 25.1% as at 31 December 2018, as compared to 26.4% as at 30 June 2018. Estimated NTA of A$2.96 and gearing of 25.1% are subject to final audit review.
Today, the company has also provided an update regarding the performance rights under the Long-Term Incentive (LTI) Plan. It has forfeited 43,070 FY17 performance rights under 2016 LTI grant and 46,031 FY18 performance rights under 2017 LTI grant. Currently, it holds 2,573,398 FY17 performance rights under 2016 LTI grant, 3,081,294 FY18 performance rights under 2017 LTI grant, and 3,307,020 FY19 performance rights under 2018 LTI grant.
Vicinity Centres’s stock has generated a positive return of 3.57% during the YTD 2019. It is currently trading at A$2.560 (as on 24 January 2019) with a fall of 1.916% in the price during the day’s performance. The company has ~3.83 billion shares outstanding with a market cap of circa A$10.00 billion.
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