Stockland Corporation
SGP Details
Stockland Corporation (ASX: SGP) is engaged in developing and managing residential and commercial property assets. It operates through five segments - Commercial Property, Residential, Land Lease Communities, Retirement Living, and Other.
3QFY22 Trading Update:
- SGP maintained higher occupancy levels in Q3FY22. The rental collection reached 95%.
- Net sales in the Residential segment reached 1,562 (vs. 1,891 in Q3FY21), reflecting new product launches skewed to Q4FY22.
- Its Land Lease Communities (LLC) posted a slowdown with 94 units of net sales. SGP is on track to complete the Stockland Residential Rental partnership with Mitsubishi Estate Asia that is slated to be completed in late FY22.
- In the LLC segment, SGP experienced an uptick in the average sales price of over 4.3%. SGP is on track to deliver 220-240 home site settlements in FY22.
Key Financials Snapshot (Analysis by Kalkine Group)
Key Risks: Rising interest rates may affect affordability and impact sales volume. Higher financing costs may impact the construction pipeline.
Outlook: Its capital partnership with Ivanhoe Cambridge is expected to be completed by July 2022. SGP is expecting demand for the residential segment to remain at an elevated level over the near term. The company is targeting the gearing ratio of 20-30% and distributions to be in the ambit of 75-85%.
Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: The stock of SGP has been corrected by ~6.73% in the past three months. The stock of SGP has recovered from its 52-week low price of $3.770. The stock has been valued using a P/E multiple-based illustrative relative valuation and arrived at a target price of low double-digit growth (in % terms). The company can trade at a slight premium to its peers, considering the higher occupancy levels in Q3FY22. For the purpose of valuation, peers such as Mirvac Group (ASX: MGR), Scentre Group (ASX: SCG), Vicinity Centres (ASX: VCX), and others have been considered. Considering the rise in net profit in H1FY22, positive outlook in the residential segment, upside as indicated by the valuation, and key risks associated with the business, we recommend a ‘Buy’ rating on the stock at the closing market price of AUD 3.870, down ~0.77% as of May 25, 2022. Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
SGP Daily Technical Chart, Data Source: REFINITIV
Ingenia Communities Group
INA Details
Ingenia Communities Group (ASX: INA) develops lifestyle and holiday communities in key urban and coastal markets of Australia. It conducts its business in five segments - Lifestyle Development, Lifestyle Rental, Ingenia Gardens, Ingenia Holidays, Fuel, and Food & Beverage Services.
Recent Developments:
- INA acquired three lifestyle communities in Melbourne for $552 million. This was funded through its recently raised $475 million. The acquisition is in-line with the strategy to enhance its position in Victoria.
- INA has 6,270 total potential sites for development, of which it had received approval for 3,284 sites.
- Its H1FY22 revenue surged 8% to $131.4 million. And statutory profit improved by 23% YoY to $39.8 million.
H1FY22 Performance Highlights (Analysis by Kalkine Group)
Key Risks: Higher inventory build-up due to ongoing supply chain challenges may hamper topline expansion. Rising virus strain followed by lockdown may affect settlements.
Outlook: Due to the bleak operating environment, INA has trimmed down its FY22 forecasts. It is targeting to achieve EBIT growth of 5-10% in FY22 and underlying EPS in the ambit of 1-2 cents per share.
Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: The stock of INA has been corrected by ~24.86% in the past three months. The stock of INA has recovered from its 52-week low price of $3.780. The stock has been valued using a P/E multiple-based illustrative relative valuation and arrived at a target price of low double-digit growth (in % terms). The company can trade at a slight discount to its peers, considering the downward revision in FY22 estimates. For the purpose of valuation, peers such as Centuria Capital Group (ASX: CNI), Mirvac Group (ASX: MGR), Home Consortium Ltd (ASX: HMC), and others have been considered. Considering the rising topline in H1FY22, acquisition of three lifestyle communities, upside as indicated by the valuation, and key risks associated with the business, we recommend a ‘Buy’ rating on the stock at the closing market price of AUD 3.980, down ~1.24% as of May 25, 2022. Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
INA Daily Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.
Technical Indicators Defined: -
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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