This report is an updated version of the report published on 21st April 2022 at 1:20 PM (GMT +10)
Charter Hall Group
CHC Details
Charter Hall Group (ASX: CHC) is one of Australia's leading fully integrated property groups with more than 30 years' experience in property investment and funds management.
Result Performance for H1FY22 (For the Half-Year Ended 31 December 2021)
- The company recorded operating earnings of $263.9 million, or OEPS post-tax of 56.6cps. Its statutory profit was $517.8 million, after tax attributable to stapled securityholders.
- The Property Investment portfolio grew by $432 million, or 18% during H1FY22 to $2.85 billion and generated a 25.5% total property investment return.
- Portfolio occupancy stayed strong at 97.4% and the Weighted Average Lease Expiry (WALE) stood at 8.6 years.
- The Group’s managed funds rose $27.2 billion to $79.5 billion, or 52% growth during the period driven by Property FUM growth of $9 billion or 17.2%.
Source: Analysis by Kalkine Group
Recent Update
- On 30th March 2022, Charter Hall managed partnership including Dutch pension fund PGGM, and Charter Hall have formed a Scheme Implementation Agreement (SIA) with Irongate Group (ASX: IAP) to acquire all IAP stapled securities through trust schemes of arrangement. As per the agreement, Charter Hall will hold a 12% interest in the Partnership, and the balance 88% stake will be owned by PGGM. The agreement also entails IAP shareholders to receive $1.90 cash per IAP stapled security as well as the distribution for the period ending 31 March 2022 of up to 4.67 cents per IAP stapled security.
Outlook
The company continues to witness a strong pathway of growth for the group driven by the investment capacity of $6.7 billion across the platform, along with the sustained robust demand from capital partners to deploy equity, a growing development pipeline and significant retained earnings. The company is witnessing decent prospects to grow the PIM partnership by way of exploiting its large retail investor community as well as its strong wholesale investor relationships. Notably, the company has guided to achieve post-tax operating earnings per security of at least 112 cents in FY22. Further, its FY22 distribution per security guidance remains unchanged at 6% growth over FY21.
Key Risks
Material business risks faced by the property investment portfolio, which could impact its financial performance, include interest rate risk, refinancing risk, lease defaults or extended vacancies, portfolio concentration risks, development risk, among others.
Valuation Methodology: Price/EPS Based Relative Valuation (Illustrative)
Technical Overview:
Chart:
Source: REFINITIV
Note: Purple Color Line Reflects RSI (14-Period)
Stock Recommendation
The stock has been valued using P/E multiple based relative valuation (on an illustrative basis), and the target price so arrived reflects a rise of low double-digit (in % terms). In addition, a slight premium has been applied to peer average P/E multiple (NTM basis) considering growing development pipeline, earnings resilience, and diversification of the Property Investment portfolio.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
Considering the factors above, we give a “Buy” recommendation on the stock at the current market price of $15.650 per share (Time: 10:32 AM (GMT +10), Sydney, Australia) on 21st April 2022.
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decisions 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.
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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