Stocks’ Details

Dexus

Decent Achievement Across Key Resources: Dexus (ASX: DXS) is an Australian REIT that owns, manages, and develops high-quality real estate assets and real estate funds on behalf of third-party investors. As on 19 August 2020, the market capitalization of the company stood at ~$9.18 billion. Despite the unprecedented market conditions, DXS delivered solid achievements across the key resources and maintained decent financial performance by delivering on its strategy. During FY20, the company reported total funds under management of $32 billion. In the same time span, AFFO (adjusted funds from operations) stood at 50.3 cents per security and distribution also came in at 50.3 cents per security. During the year, NPAT of the company stood at $983 million, reflecting a fall of 23.3%

FY20 Operational and Financial Highlights (Source: Company Reports)

Impact of COVID-19: The sudden outbreak of COVID-19 adversely impacted the financial results of the company. However, the company progressed on its strategic objectives and delivered solid operational achievements for the year.

Outlook: The company is aiming to optimize its property portfolio and accelerate opportunities to expand its funds management platform. DXS will continue to work with its customers on the future of workspace and is focused on progressing the city-shaping development pipeline.

Key Risks: The company is susceptible to a variety of risks, including reputational damage, costs or sanctions associated with a  to expand its funds management regulatory response, reduced investor sentiment, reduced credit ratings and availability of debt financing, inability to attract new third-party capital partners, etc.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

EV/EBITDA Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company seems to be well-positioned with a record of delivering on its strategy, a stable management team, a quality property portfolio with a diversified customer base, and a healthy balance sheet. As per ASX, the stock of DXS is trading close to its 52-week low of $8.03, proffering a decent opportunity for accumulation. On the technical analysis front, the stock of the DXS has a support level of ~$8.039 and a resistance level at ~$9.316 and $10.221. We have valued the stock using the EV/EBITDA multiple based illustrative relative valuation method and have arrived at a target price of low double-digit growth (in percentage terms). Considering the current trading levels, resilience of the business in the softer market conditions, positive long-term outlook and decent financial and operational performance, we recommend a ‘Buy’ rating on the stock at the current market price of $8.48, up by 0.832% on 19 August 2020, owing to its recent release of FY20 results.

Crown Resorts Limited

FY20 Financial Highlights: Crown Resorts Limited (ASX: CWN) is an international casino and gaming entity, with businesses and investments in key international markets. As on 19 August 2020, the market capitalization of the company stood at ~$6.43 billion. 2020 has been a challenging year for the company and experienced softer trading conditions as a result of travel restrictions and general community uncertainty in response to COVID-19. During FY20, EBITDA of the company witnessed a decline of 40.6% to $504.6 million and reported a decline in NPAT attributable to the parent of $79.5 million. With effect from 27 June 2020, Crown Perth re-commenced its gaming activities and the operation of the majority of its food and beverage venues. During the year, net operating cash flow stood at $326.9 million and net debt position was $891.5 million. In the same time span, total liquidity was $639.8 million.

FY20 Financial Highlights (Source: Company Reports)

Appointment of Statutory Auditor: The company has recently approved the appointment of KPMG as a statutory auditor of the company from the financial year beginning 1 July 2020.

Key Risks: The company is exposed to a variety of risks including subdued economic conditions and consumer confidence while the extent and duration of the COVID-19 pandemic remain unknown. It is also susceptible to risks related to the legal and regulatory compliance, negative publicity of Crown, Volatility of Gaming Revenue, etc.

Valuation Methodology: Price to Cash Flow Multiple Based Relative Valuation (Illustrative)

Price to Cash Flow Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Given the backdrop of uncertainty in the global markets, CWN remained focused on liquidity management to withstand this extended period of closure. As per ASX, the stock of CWN gave a return of 5.68% in the past one month. On the technical analysis front, the stock of the CWN has a support level of ~$8.606 and a resistance level of ~$11.53. We have valued the stock using the price to cash flow multiple based illustrative relative valuation and have arrived at a target price of low double-digit growth (in percentage terms). Considering the decent returns in the past one month, re-commencement of gaming activities, and long-term outlook, we recommend a ‘Buy’ rating on the stock at the current market price of $9.80, up by 3.267% on 19 August 2020, owing to its recent release of FY20 results.

Vicinity Centres

Well-Capitalized and Ample Liquidity: Vicinity Centres (ASX: VCX) is an Australian REIT, engaged in property investment, management, development, leasing, and funds management. As on 19 August 2020, the market capitalization of the company stood at ~$6.12 billion. During FY20, the company reported FFO of 13.7 cents as compared to 18.0 cents for FY19 and a decline in distribution per security to 7.7 cents for FY20, compared to 15.9 cents in the prior year. This was impacted due to the effects of COVID-19 pandemic. In the same time span, the company reported a statutory net loss after tax of $1,801.0 million as compared to a statutory net profit after tax of $346.1 million for FY19. This was mainly due to a decline in FFO, property valuation loss, and impairment of goodwill. During the year, the company was well-capitalized with the liquidity of $2.1 billion and gearing of 25.5%.

FY20 Financial Highlights (Source: Company Reports)

Outlook: The company is expecting that the uncertainty in the market would prevail for a little longer period. It is focused on stabilizing centre occupancy and rental income and managing costs. The company is executing its strategy including advancement through the planning of retail and retail-led mixed-use projects. VCX will continue its strong retail partnerships to create mutually beneficial outcomes. 

Key Risks: The company expects that the retail conditions may be impacted by the restricted domestic and international tourism, the second wave of COVID-19 cases, the potential for significant outbreaks of COVID-19 in other areas of Australia, subdued economic conditions and consumer confidence while the extent and duration of the COVID-19 pandemic remain unknown. The company is also susceptible to the risks related to the achievement of target portfolio composition and funding and investment opportunities. 

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: For the period ended June 2020, the company reported a total portfolio value of $14.1 million with 60 retail assets. It has taken a proactive approach to debt capital management, with a focus on maintaining its investment-grade credit ratings. As per ASX, the stock of VCX is inclined towards its 52-weeks’ low level of $0.905, proffering a decent opportunity for accumulation. On the technical analysis front, the stock of the VCX has a support level of ~$1.15 and a resistance level of ~$1.643 and $1.953. We have valued the stock using the EV/Sales multiple based illustrative relative valuation and have arrived at a target price of low double-digit growth (in percentage terms). Considering the current trading levels, resilience of the business in the softer market conditions, modest long term outlook and decent financial and operational performance, we recommend a ‘Hold’ rating on the stock at the current market price of $1.275, down by 5.204% on 19 August 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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