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In today’s daily we have covered stock research on Stockland (Expensive).
The S&P 500 was up by 20.80 points or 0.99% to 2121.24 on Thursday. The Nasdaq Composite on Thursday erased its last standing milestone from the dot-com era as it set a record intraday high, with stocks on Wall Street in rally mode boosted by strong economic data. The Nasdaq Composite hit a high of 5,143.316, topping the previous 5,132.52 record which stood since March 10, 2000. It also set a record closing high, as did the Russell 2000, while the S&P 500 closed within 0.5 percent of its record.
Fitbit shares ran up as much as 59.5 percent to $31.90 in their market debut before closing at $29.68, 48.4 percent above the $20 IPO pricing. Euro zone leaders will hold an emergency summit on Monday to try to avert a Greek default, after bank withdrawals accelerated and government revenue slumped as Athens and its international creditors remained deadlocked over a debt deal. Shares of Oracle Corp. sank 4.8% after the hardware and software maker reported a larger-than-expected sales decline and missed profit forecasts for its May 31 fiscal quarter.
Oracle Daily Chart (Source - Thomson Reuters)
S&P ASX 200 was down by 70.50 points or 1.26% on Thursday and closed at 5524.90 points. Pureplay iron ore miners had another bad day as the iron ore price continued to drop. Fortescuecrashed 4 per cent to $2.13 and Arrium retreated 3.6 per cent to 13.5c. Consumer staples were also in the red with Woolworths losing a further 0.7 per cent to $26.60. Wesfarmers also reflected the gloom in the consumer staples sector, tumbling 2.9 per cent to $40.20.
Burson Group shares soared after the car parts maker completed the institutional component of an entitlement offer to raise about $218 million. The stock finished 13.8 per cent higher at $3.50. Healthcare heavyweight CSL had another poor day, losing 1.4 per cent on top of Wednesday's 1.1 per cent loss. It finished at $85.97. ANZ slipped 1.5 per cent to $32.37, Commonwealth Bankdipped 1.2 per cent to $83.20, NAB shed 0.7 per cent to $33.13 and Westpac sank 1.3 per cent to $32.48.
Burson Daily Chart (Source - Thomson Reuters)
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Stock Of The Day - Stockland (Expensive)
Stockland Corporation Ltd (ASX: SGP) operates in Commercial, Retail segment and Retirement living. The company has a huge exposure to the commercial properties and divided the commercial segment into Retail, logistics & business parks and Office segments. These three segments within the commercial segment comprised over 50%, 13% and 8% of the group’s portfolio as of third quarter of 2015. Residential and Retirement living accounted 20% and 9% of the group’s overall portfolio.
Five years indicative asset mix (Source: Company Reports)
Retail Segment
All the categories in the retail segment performed well, with specialty sales and Mini-Major Categories delivering the highest growth of 4.9% and 5% respectively. Specialty category growth was driven by communication, technology, homewares and food catering segments, while Mini-Major and others segment benefited from cinema, travel agents and non-food majors.
Retail Sales by Category and projects under development (Source: Company Reports)
As per the development pipeline, Wetherill par has opened, attracting 53 new retailers. Second stage of the project is expected to be completed by mid of 2016. The first stage development at Harrisdale, WA has also started and even got approval to expand over 25,000 sq m in the future. Hervey Bay and Baldivis projects are also launched.
Wetheriil park Stage and Harrisdale Greenfield development (Source: Company Reports)
Logistics & Business Parks; Office
The firm acquired three eastern seaboard logistics for $66.5 million. Stockland bought 1.5 hectare site for $20.3 million at Botany, Sydney; 9.8 hectare site for $29 million and 11.5 hectare site for $17.2 million. Meanwhile, the firm had over 93.3% portfolio occupancy and a leasing activity of around 132,000 sq m for the nine months to 31st march. Office Portfolio’s WALE rose marginally to 4.6 years. Piccadilly tower witnessed new leasing activity of over 1,500 sq m.
Logistics & Business Parks; Office (Source: Company Reports)
Residential Segment
Stockland recently reported its intention to commit over $300 million for the development of its biggest project - Caloundra south community project on the Sunshine Coast which is committed to deliver 20,000 homes for 50,000 people over the next 30 years
With regards to the Cloverton community, the $4.6 billion project would be developed in the next 35 years. This project is being built on an 1141 hectares and Construction works of roads and services have started. Stockland expects a positive demand for this project as Victoria's population has been adding over 100,000 a year from 2007/2008.
To leverage the growing demand for affordable housing, the company is also striving to offer affordable housing homes through its Cloverton community. People who are buying homes for the first time will be able to build a three-bedroom house for over $270,000, lower than half of the present Melbourne median house price. The company intends to first release over 34 lots for prices of $230,000 for 846-square-metre block, as compared to median Melbourne house price of $549,000, based on CoreLogic RP Data figures. Overall, Stockland has an objective to deliver 11,000 lots in Victoria which includes the smaller lots.
Meanwhile, the residential net deposits during the third quarter of 2015 decreased to 1,427 net deposits, as compared to 1,500 net deposits in 3Q14 and 1,642 deposits in 2Q15. Slowing demand in Queensland and Victorian are partly responsible for this slight decrease. Moreover, net deposits from NSW category showed a decline due to delay in settlements pending the delivery of trunk infrastructure. Meanwhile, WA volumes improved due to summer sales campaign. Stockland made four acquisitions with over 4000 homes at Scholfields in Sydney, Scarbourgh in Brisbane, Cycle North and point Cook in Melbourne.
Residential segment performance (Source: Company Reports)
Retirement living
Net reservation at Retirement living also slowed down during the quarter to 214, as compared to 218 in 3Q14 and 281 in 2Q15. Meanwhile, Stockland is making efforts to achieve unit turnover for FY15 in line with the prior year and developing accordingly.
Therefore to boost this segment, Stockland quite recently bought a portfolio of retirement villages in South Australia from Masonic Homes for $75.8 million. The portfolio consists 980 homes as well as a pipeline of over 130 homes or development. The deal is the major retirement living transaction by the company for the year and is a measure of the company’s focus on higher returning assets as a part of its capital recycling program. The development of $160 million cardinal freeman development is also on track.
Retirement living performance (Source: Company Reports)
Conclusion
The shares of Stockland haven’t excited the investors as they delivered a year to date returns of just over 3.2% as compared to the S&P/ASX 200 returns of over 3.4%. In fact the stock delivered around 3.2% over the last six months, lower than the S&P/ASX 200 returns of approximately 8.4%. . Although huge residential development by Stockland might drive the firm’s earnings, rise in interest rates or economic slowdown might put the stock under pressure. Meanwhile, the shares are already under pressure over the last few months, posting a negative returns of 3.9% and 3.4% over the last three months and one month respectively.
Stockland Daily Chart (Source - Thomson Reuters)
Meanwhile, Stockland improved its full year EPS growth forecast to 7%-7.5% for FY15, as compared to the previous forecast of 6.75% to 7.5%. The company is on track to achieve its 5,000 to 6,000 lots target for the fiscal year. Although the company raised its full year guidance, we believe that the stock is currently trading at Expensive levels.
Level 13 167 Macquarie Street
Sydney NSW 2000 Australia
E-Mail - [email protected]
Phone - 02 8667 3147
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