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Highlights
- Vicinity has upgraded its previous FFO and AFFO guidance for FY22.
- The company has uplifted preliminary valuations by AU$245 million for six months ending June.
Property and funds management business Vicinity Centres (ASX:VCX) upgraded its FY22 guidance today (June 20). The company also announced an AU$245 million uplift in its preliminary valuations. The uplift relates to the six months ending 30 June 2022. The updated forecasts are an upgrade to Vicinity's previous guidance being part of its interim results in February, which were reaffirmed in May. As a result, VCX's share price has gone up 3.16% to trade at AU$1.795 a share at around 10.30 AM AEST.
What is Vicinity’s latest FY22 earnings guidance?
Vicinity, in its upgraded forecast, expects funds from operations (FFO) for FY22 to be a minimum of AU$0.126 per security. It also anticipates the adjusted funds from operations (AFFO) to be AU$0.103 per security or more.
The guidance update is majorly a result of the sustained strength of retail sales. Other factors include Vicinity's improved negotiation outcomes with retailers resulting in stronger than expected cash collections for the ongoing and prior years. Vicinity's cash collections for H2-FY22 to date have improved to 91% of its gross billings, from an earlier 89% as of 28 April 2022.
Meanwhile, Vicinity forecasts its full-year distribution to be at the lower end of the 95-100% range on the AFFO target. The company's final distribution announcement is expected to be released by 17 August 2022, along with its FY22 results.
Vicinity also quoted preliminary asset valuations for 30 June 2022, indicating an AU$245 million uplift. It is a 1.7% uplift in book values estimated at around AU$0.54 cents per security for the six months ending on 30 June 2022. Vicinity has also tightened the weighted average capitalisation rate from 5.35% to 5.31%.
The uplifted valuation was a result of Vicinity's regional and sub-regional assets continuously benefitting from the pricing of third-party interests. The interest lies in assets where Vicinity is a joint owner and helps in delivering meaningful valuation gains.
Vicinity's outlet valuations were reportedly continuing to grow due to income growth and tightening capitalisation rates. These were reflective of the company's outlet portfolio and its resilience through market cycles. The CBD asset valuations were in line with 31 December 2021 based on resilient leasing activity and improving re-leasing spreads. Sophisticated retailers were reportedly consolidating store networks into Premium CBD centres leading to the improvement.
Further, Vicinity was also undergoing independent valuations for thirty-two of its assets, representing around 56% of the portfolio by value. Meanwhile, the remaining 27 assets of Vicinity remain subject to internal valuations.
Management Commentary
Vicinity believes that the trading conditions continue to support its ongoing recovery from COVID. The company’s key priority area remains the related lease variation negotiations and collecting current and outstanding rent for the lead up to 30 June 2022.
Kelley also talked about the increase in preliminary asset valuations, stating an income growth across a number of Vicinity's flagship Premium, Outlet and Sub-regional centres as a driver of the valuations uplift.
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