Stocks’ Details

Mirvac Group

Strong Financial Trajectory: Mirvac Group (ASX: MGR) is engaged in property investment for the purpose of deriving rental income and investments in unlisted funds.

Change in Director’s Interest: The company recently updated the exchange that Susan Lloyd-Hurwitz, one of the directors, acquired 1,243,093 stapled securities at a price of $3.19 per security. The new Staples Securities were issued to satisfy the vesting of FY19 Performance Rights.

FY19 Financial Performance: During the year ended 30 June 2019, the company reported a statutory profit of over $1.019 billion for the fourth consecutive year, amounting close to the top end of guidance. Operating profit for the period was reported at $631 million, up 4% from the operating profit of $608 million in FY18. Full-year distributions amounted to $440 million, up 5% on the previous year at 11.6 cents per stapled security. Group Return on Invested Capital for the year was reported at 10.1%.


Statutory Profit (Source: Company Reports)

EBIT contribution from the Office & Industrial segment was the highest at $518 million, up 26% in comparison to the previous year EBIT of $411 million. Retail segment witnessed an uplift of 4% with FY18 EBIT of $162 million and FY19 EBIT of $168 million. Balance sheet position also remained strong with the company having sufficient funds for the development pipeline and growing distribution. The company reduced gearing to 20.5%, within the target range of 20% - 30%. Liquidity increased to $1.4 billion in cash and committed undrawn bank facilities.


FY19 Operating Results (Source: Company Reports)

Outlook: In FY20, the company expects to achieve more than 2,500 lot settlements. Gross margins for the period are expected to remain above through cycle target of 18% - 22%. EPS for the year is expected to be between 17.6 – 17.8 cents per stapled security, representing an increase of 3% - 4% on the previous year. The company has also provided distribution guidance of 12.2 cents per stapled security, representing a growth of 5% on FY19.

Stock Recommendation: The stock of the company generated returns of ~43% on a YTD basis and is currently priced close to its 52 weeks high level of $3.415. In FY19, the company delivered financial results in-line with expectations. With its robust capital position and earnings growth, the company is well-placed to continue to generate strong returns for its shareholders. However, looking at the current trading level, we presume that the majority of the positive factors are priced in. Hence, we give an “Expensive” rating on the stock at the current market price of $3.210, up 1.905% on 20 August 2019.
 

Scentre Group

Substantial Capital Release from Recent Transactions:Scentre Group (ASX: SCG) owns and operates shopping centres.

Changes Related to Buy-Back: The company recently updated that Credit Suisse Equities (Australia) Limited has been appointed as a broker for the buy-back program of up to A$800 million, announced on 27 June 2019.

Dividend update: In another announcement, the company notified that the shareholders will be paid a dividend amounting to AUD 0.1130 per ordinary shares or staple security. The scheduled date of payment is 30 August 2019.

Disposal of Sydney CBD Office Towers: Scentre Group has disposed its Sydney CBD office towers for a value of $1.52 billion, to certain funds managed by Blackstone. The company will use the proceeds to repay its debt. The transaction is expected to be dilutive to Funds From Operations (FFO) by approximately 0.4 cents per security in 2019.

JV Partnership with Perron Group: The company also updated on the Perron Group becoming the new 50% joint venture partner in Westfield Burwood in Sydney. As a part of the transaction, Perron Group will make a payment of $575 million for its interest. The proceeds will initially be utilised to repay the company’s debt and will also be used to further capitalise the company’s strategic objectives. This transaction is expected to be dilutive to 2019 FFO per security by approximately 0.2 cents.

Q12019 Update: As at 31 March 2019, the company had leased 99.3% of its portfolio with 448 lease deals completed by the end of the period. The deals comprised a total area of 71,084 sqm. Total speciality in-store sales went up by 1.5% Q-o-Q, and 1.7% over a period of 12 months.


Operational Highlights (Source: Company Reports)

FY19 Forecast:The company has forecasted distribution for 2019 at 22.60 cents per security, up 2% on 2018. The forecasted FFO growth for 12 months ended 31 December 2019 stands at approximately 3%.

Stock Recommendation: The stock of the company generated negative returns of 3.04% and 0.52% over a period of 1 month and 3 months, respectively. The company is progressing well on enhancing its platform through Westfield Newmarket redevelopment in Auckland. Stage openings for the same are expected to commence in early Q32019. The recent sale of Sydney CBD office towers along with the JV partnership with Perron Group, the company has released total capital of $2.1 billion that will be utilised to further pursue its strategic objectives and create long-term value for securityholders. Considering the above factors, we give a “Buy” recommendation on the stock at the current market price of $3.900, up 1.828% on 20 August 2019.
 

Stockland Corporation Limited

Continued Improvement in Retail Sales:Stockland Corporation Limited (ASX: SGP) owns and develops real estate assets in Australia.

Shareholding Update: The company recently updated that Legg Mason Asset Management Limited became a substantial shareholder of the company with the voting power of 5%.

Capital Partnership: The company recently announced a strategic capital partnership with Capital Property Group, in its residential portfolio. Capital Property Group has invested 50% interest in Aura on the Sunshine Coast, Stockland’s largest master planned community. The partnership with Capital Property Group helps the company strengthen its balance sheet, enabling it to invest in other growth opportunities across its portfolio.

3Q19 Highlights: During the quarter, the company completed $284.5 million of non-core Retail Town Centre divestments, with a target to achieve $400 million within 12 months. Workplace and logistics leasing activity remained strong, with 376,000 square metres leased the year to March.


W&L Performance (Source: Company Reports)

FY19 Estimated Distribution & Guidance: The company anticipates estimated distribution of 14.1 cents per Ordinary Stapled Security for the six months ended 30 June 2019, with full-year distribution amounting to 27.6 cents per security. The securityholders will receive the dividend on 30 August 2019. FY19 FFO per security growth is expected to be approximately 5%.

Stock Performance: The stock of the company generated returns of 18.30% over a period of 6 months. During 3Q19, the company reported strong leasing results for Workplace & Logistics, maintaining high occupancy and progressing the development pipeline. The company also completed a security buy-back of $169 million out of the total target of $350 million, which is accretive to earnings. The capital partnership with the Capital Property Group has brought in additional flexibility for investment in other counter-cyclical residential opportunities. Accounting profit from the transaction will be recognised in FY20. In 1HFY19, the company had an EBITDA margin of 35.8% as compared to 27.9% in 1HFY18.Currently, the stock is priced close to its 52 weeks high level of $4.740 with PE multiple of 16.89x and an annual dividend yield of 6.19%. Hence, considering the aforesaid facts and current trading levels, we give a “Hold” recommendation on the stock at the current market price of $4.600, up 3.139% on 20 August 2019.


Comparative Price Chart (Source: Thomson Reuters)  

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.