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Highlights
Centuria Capital Group's share price has decreased by approximately 50% since September 2021 and 15% since late September 2024.
Potential interest rate cuts by the Reserve Bank of Australia could positively impact Centuria's asset valuations and cost of debt.
The company is projected to maintain a strong distribution yield, with a payout ratio of 86.7% for FY25.
Centuria Capital Group (ASX:CNI) has garnered attention as a notable opportunity in the ASX dividend stock landscape. The company's share price has seen a substantial decline, dropping around 50% since mid-September 2021 and 15% since late September 2024. This decline alone does not dictate its potential value, but it contributes to the appeal for those exploring current opportunities.
One significant factor affecting Centuria's share price has been the increase in interest rates in Australia since 2022. Higher rates typically exert downward pressure on asset valuations, particularly within the commercial property sector. Additionally, property companies often carry debt, which has become more costly in the current environment. However, the potential for interest rate reductions by the Reserve Bank of Australia could reverse these trends. Such cuts may enhance the value of Centuria's property portfolio, attract more capital from investors, and decrease the company's debt servicing costs.
The intrinsic value of Centuria’s operations is notable, with management and property assets appearing undervalued. In FY24, the company generated operating earnings per security of 11.7 cents, leading to a valuation of less than 16 times these earnings. Moreover, projections indicate an increase in operating earnings to 12 cents per security in FY25. Centuria's holdings in real estate investment trusts (REITs), including Centuria Industrial REIT and Centuria Office REIT, contribute further to its asset base and may also be undervalued.
For those interested in yield, Centuria is positioned as an attractive option, anticipating a distribution of 10.4 cents per security for FY25, which represents a growth of 4% compared to FY24. With a payout ratio of 86.7%, the distribution yield for FY25 is projected at 5.7%, providing a solid foundation for future income growth. This combination of potential recovery, management quality, and yield makes Centuria Capital Group a compelling opportunity in the current market.
