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Highlights
- Stockland revises FY25 earnings guidance post-acquisition of 12 residential communities.
- FY25 distribution aligns with 75-85% payout of funds from operations.
- Projected gearing stays within target range, with strong settlement volumes expected.
Stockland Corporation (ASX:SGP) has recently raised its FY25 earnings forecast following a substantial acquisition of masterplanned residential communities. This acquisition involves 12 communities purchased from Lendlease (ASX:LLC) through the Stockland Supalai Residential Communities Partnership, a strategic expansion valued at around $1.06 billion. With regulatory clearances complete, the acquisition is expected to conclude in the second quarter of FY25, pending specific landowner approvals. Initially revealed in December 2023, this transaction aims to expand Stockland’s development portfolio significantly.
As one of Australia’s foremost property groups, Stockland is widely recognized for its residential, retail, and workplace community developments. This latest acquisition reinforces its commitment to increasing growth in these areas. Following the deal, Stockland has revised its funds from operations (FFO) per security guidance for FY25. Originally, the FFO per security forecast was set between 32.0 and 33.0 cents post-tax. The company has now raised this range to between 33.0 and 34.0 cents, attributing the adjustment to anticipated part-period earnings from the acquired communities.
Stockland also expects a notable shift in its earnings distribution, with a heavier emphasis on the latter half of FY25. This adjustment is attributed to contributions from both the newly acquired communities and expected settlement volumes within Stockland’s pre-existing portfolio. The anticipated rise in settlement volumes demonstrates Stockland’s focus on steady growth in its residential segment. Projected settlements for its masterplanned communities are now set between 6,200 and 6,700 lots, a significant increase from previous estimates of 5,300 to 5,700 lots. Additionally, the company expects average profit margins in the low 20% range for these communities, highlighting a positive outlook for profitability.
In terms of financial positioning, Stockland foresees a temporary increase in its gearing ratio due to the equity contribution and development expenditures associated with the acquisition. However, the company remains confident that its gearing will remain within its target range of 20-30% by the end of December 2024. Stockland has confirmed its distribution per security for FY25 will align with its target payout ratio of 75-85% of FFO, providing a balanced approach to returning funds to security holders while supporting expansion.
This strategic acquisition underscores Stockland’s ongoing growth trajectory in Australia’s property development landscape, marking a strong outlook for its FY25 performance and beyond.
