GPT Group

GPT Details

Portfolio Occupancy on a Higher Side: GPT Group (ASX: GPT) is engaged in real estate activities. The company owns and manages a diversified portfolio of Australian retail, office, and logistics property assets. Its segments include Retail, Office, Logistics and Funds Management. The company has registered a solid portfolio occupancy at 98.4% in FY20 with an improved retail net billings collection in 2H2020 due to completion of portfolio under development and recovery from Covid-19 situation leading to re-opening of shopping centres. Logistics segment has registered a higher portfolio occupancy of 99.8% in FY20, retail segment has registered a portfolio occupancy of 98.0% in FY20 and office segment occupancy of 94.9% during the same period.

FY20 Financial Highlights: The company has registered a decline in its Funds from Operations (FFO) to $554.7mn in FY20 as compared with $613.7mn in FY19 due to significant decline of 30.8% YoY in funds from retail segment. The company has registered a net loss of $213.1mn in FY20 on the back of a negative property valuation movement of $712.5mn in FY20.

Key Financials (Source: Company Reports)

Key Risks: COVID-19 pandemic may lead to the lower sales and occupancy of the properties held by the company and may result in a decline in fund value. Economic Slowdown may result in a decline in the prices of properties and the demand for new properties, which may result in lower returns or profits on the property portfolio held by the company.

Outlook: As per the company reports, GPT expects to post an improved FFO and Distribution per Security (DPS) in 2021. The company is estimating the growth of 8% YoY in FFO in FY21 and a growth of 12% YoY in DPS in FY21. The growth is expected as the group is expecting no further disruptions from Covid-19 related restrictions.  

Valuation Methodology: Price/Earnings Per Share based Relative Valuation Method (Illustrative)

Data Source: Refinitiv, Thomson Reuters, 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: In the last one month, GPT has increased by ~4.01% and by ~6.88% in the last three months. The current market capitalisation of GPT stands at ~$9.36bn as of 19 April 2021. The stock is currently trading above the average 52-week price level range of ~$3.580-~$4.940. On the technical analysis front, the stock has a support level of ~$4.649 and a resistance of ~$4.897. We have valued the stock using a P/E multiple-based illustrative relative valuation method and arrived at a target price of high single-digit upside (in % terms). We believe that the company can trade at a slight discount as compared to its peer average, considering the company has posted a net loss in FY20 and reported decline in funds from the retail segment. For this purpose, we have taken peers Mirvac Group (ASX: MGR), Dexus (ASX: DXS), Charter Hall Group (ASX: CHS) to name a few. Considering a decent occupancy among its segments, positive outlook, associated risks with the company, valuation, and gain in segmental portfolio valuation, we recommend a “Hold” rating on the stock at the current market price of $4.66, down by 3.119% as on 19 April 2021.

GPT Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Vicinity Centres

VCX Details

Improvement in Cash Collection: Vicinity Centres (ASX: VCX) is engaged in managing funds in real estate segment in Australia. The company primarily operates in property investment, property management, property development, leasing, and funds management. The company has registered an increase in customer visitation to the stores following the ease of COVID-19 restrictions, resulting in an increase in sales. The cash collection rate as percentage of gross rental billings increased to 72%, which also represents 90% of expected net billings.

Growth in Rental Billings Collection (Source: Company Reports)

1HFY21 Financial Highlights: The company has registered a decline in its Net Property Income to $344.4mn in 1HFY21 as compared with $438.9mn in 1HFY20 mainly because of Covid-19 restrictions in Melbourne. The company has registered a net loss of $394.1mn in 1HFY21 as compared with a net profit of $242.8mn in 1HFY20.

Key Risks: The company requires liquidity to meet the demand from its customers at any time. In case of low liquidity to meet customer demand, the company may face losing the business and decline in funds under management. The company is exposed to fluctuation in the prices of properties and any severe fluctuation may lead to financial losses for the company. 

Outlook: As per the company reports, VCX is cautiously optimistic on recovery in the retail segment in FY21. The company is quite confident on capitalising growth opportunities in retail segment despite COVID-19 challenges. The consumer sentiment index is at its 10-year highs. The company will utilise its data analytics technology and innovation capabilities for its growth opportunities. The company is likely to add 3,30,000 sqm of GLA to 11-hectare site and upgrade to Metro rail station by year 2024. The company is expecting to commence its project at Chatswood Chase Sydney, NSW by developing an additional 20,000 sqm of office space. 

Valuation Methodology: Price/Earnings Per Share based Relative Valuation Method (Illustrative) 

Data Source: Refinitiv, Thomson Reuters, 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: In the last three months, VCX has increased by ~3.80% and by ~21.11% in the last six months. The current market capitalisation of VCX stands at ~$7.62bn as of 19 April 2021. The stock is currently trading above the average 52-week price level range of ~$1.205-~$1.860. On the technical analysis front, the stock has a support level of ~$1.622 and a resistance of ~$1.777. We have valued the stock using a Price/Earnings Per Share multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight discount as compared to its peer median, considering net loss posted by the company in H1FY21 and decline in NPI. For this purpose, we have taken peers like GDI Property Group Ltd (ASX: GDI), Dexus (ASX: DXS), Mirvac Group (ASX: MGR) to name a few. Considering an increase in cash collection rate, commencement of new projects, and valuation, we recommend a “Buy” rating on the stock at the current market price of $1.635, down by 2.389% as on 19 April 2021.

VCX Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Centuria Capital Group

CNI Details

Proposed Merger with Primewest Group: Centuria Capital Group (ASX: CNI) is engaged in investment management activities for property funds. It mainly operates Property Funds Management, Investment Bonds Management, Co-Investments and Corporate. The company buys, manages, and sells commercial and industrial property. The company has entered in a Bid Implementation Deed (BID) with Primewest Group. Under the agreement, CNI will make an offer for 100% holding in Primewest Securities. As per the offer from CNI, Primewest shareholders will receive $1.51 per share of Primewest, which comprises of $0.20 of cash per share and 0.473 CNI shares per Primewest share based on last close of $2.77 for CNI on 16 April 2021. Both companies are engaged in management of real estate funds and with this proposed merger, both the companies likely to witness higher earnings with an increase in funds under management to ~$15.5bn. Both companies will enjoy synergies with this merger by removing dual costs incurred by an individual entity and geographic expansion for the portfolio with diversified sectors. The merger depends on the conditions set out on BID agreement. The company has enough cash to pay off its liabilities and merger with CNI will make the balance sheet more robust.

Primewest Group Cash Position (Source: Company Reports)

CNI Cash Position (Source: Company Reports)

1HFY21 Financial Highlights: The company has registered an increase in its revenue to $116.33mn in 1HFY21 as compared with $79.53mn in 1HFY20. During 1HFY21, the company has posted a decline in its profits to $42.75mn as compared with $77.99mn in 1HFY20. The company has registered an increase in cash and cash equivalents position to $202.51mn as on 31 December 2020 as compared with $174.45mn as on 30 June 2020.

Key Risks: The company manages a fund in real estate and any lack of performance from the fund against its benchmark will result in loss of the business and may result in lower funds under management. The company is exposed to a risk of lower AUM due to high competition in the segment. 

Outlook: As per the company reports, CNI is expecting to see an outperformance in Industrial and healthcare property markets in FY22. 

Valuation Methodology: P/E based Relative Valuation Method (Illustrative)

Data Source: Refinitiv, Thomson Reuters, 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: In the last one month, CNI has increased by ~14.10% and by ~17.02% in the last three months. The current market capitalisation of CNI stands at ~$1.66bn as of 19 April 2021. The stock is currently trading above the average 52-week price level range of ~$1.433-~$2.910. On the technical analysis front, the stock has a support level of ~$2.683 and a resistance of ~$2.903. We have valued the stock using a Price/Earnings Per Share multiple-based illustrative relative valuation method and arrived at a target price of high single-digit upside (in % terms). We believe that the company can trade at a slight premium as compared to its peer median, considering the company has a decent balance sheet with better cash position and anticipated benefits from the merger with Primewest Group. For this purpose, we have taken peers like ALE Property Group (ASX: LEP), Mirvac Group (ASX: MGR), BWP Trust (ASX: BWP) to name a few. Considering an increase in revenue during H1FY21, robust balance sheet, associated risks with the company, and valuation, we recommend a “Hold” rating on the stock at the current market price of $2.750, down by 0.723% as on 19 April 2021.

CNI Daly Technical Chart (Source: Refinitiv, Thomson Reuters)

Note: 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.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine do not hold interests in any of the securities or other financial products covered on the Kalkine website.