Company Overview: Centuria Capital Group (ASX: CNI) is engaged in investment management activities for a property fund. The company buys, manages, and sells commercial and industrial property. The company reports its performance in the following operating segments, namely (1) Property Funds Management, (2) Developments, (3) Property and Development Finance, (4) Investment Bonds Management, (5) Co-Investments and (6) Corporate. The company was listed on ASX in March 2002.

CNI Details

CNI Rides on Decent Fundamentals & Shareholder’s Return: 1HFY22 marked a successful year for CNI with attractive results and continued business growth.

Operational Highlight; Analysis by Kalkine Group

1HFY22 Results Highlights:

• Rise in Revenues & Profits: In 1HFY22, the company reported total operating revenues of $139.4 million, depicting a rise of 26% year over year. Operating Profit After Tax came in at $58.7 million, up 73% on pcp. This resulted in an operating EPS of 7.4 cents per security. The company recorded a transaction fee income of $24.4 million in 1HFY22, up a whopping 400% on pcp.
• Dividend Distribution: The company declared a distribution of 5.5 cps for 1HFY22, which increased ~22% on 1HFY21. CNI remains on track to enhance its asset diversification and deliver increasing investor returns.
• Growth in AUM: The company’s platform delivered decent growth and create value across the platform. During the half-year, the company reported growth in assets under management (AUM) to $20.2 billion, signifying an increase of 16% on FY21, primarily driven by the growth in real estate AUM and gross acquisitions. The company has a CAGR of 45% in its AUM from 30 June 2017 to 31 December 2021.
• Decent Liquidity Position: CNI generated a strong operating cash flow of $78.44 million in the 1HFY22, supported by higher management fees and performance fees. The company ended 1HFY22 with $241 million of cash and undrawn debt on hand, with a robust operating interest cover ratio of 9.4x. Net asset value (NAV) per security came in at $2.00 in 1HFY22, up from $1.92 reported in 1HFY21.

Key Segmental Highlights; Analysis by Kalkine Group 

Key Metrics: The company reported a gross margin of 96.9% in 1HFY22, compared to the industry median of 68.5%. The net margin stood at 79.8% during the same period, compared to 1HFY21 figure of 36.8%. 

Profitability Profile; Analysis by Kalkine Group  

Top 10 Shareholders: The top 10 shareholders together form around 34.92% of the total shareholding. Vanguard Investments Australia Ltd. and Pentek Holdings Pty. Ltd. are holding a maximum stake in the company at 8.12% and 4.15%, respectively, as highlighted below: 

Top 10 Shareholders; Analysis by Kalkine Group 

Risk Analysis:

Key Risks; Analysis by Kalkine Group 

Outlook:

• The company upped its operating EPS for FY22 to be 14.5 cents per share, depicting a rise of 20.8% and 9.85% over FY21 and CNI’s initial FY22 operating EPS forecast, respectively. CNI reiterated its distribution guidance of 11.0 cps for FY22.
• The company expects to benefit from the available growth opportunities in the healthcare, agriculture and real estate debt sectors and retains a stable balance sheet to support its platform expansion. The company visions a steady return to work in 1HFY22, with robust offshore and domestic demand for office assets.
• With a decent capital position, the company seems to be well-positioned to execute its strategy of delivering long term secure income and capital growth to investors.
  

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 company’s stock has been corrected by ~18.54% in the past six months. Currently, the stock is trading below the average of its 52-week high and low levels of $3.61 and $2.54, respectively. The stock has been valued using the P/E multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight premium as compared to its peers, considering an increase in the top-line, decent liquidity position, robust cash flow, upgraded EPS view, etc. For valuation, peers such as Centuria Office REIT (ASX: COF), Vicinity Centres (ASX: VCX), Stockland Corporation Ltd (ASX: SGP), and others have been considered. Hence driven by the resilient financial position, geographical expansion, guidance upgrade for FY22, indicative upside in valuation, and current trading level, we recommend a ‘Buy’ rating on the stock at the closing market price of $2.61, down by ~2.247% as on 3 May 2022. 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.

CNI 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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