Stocks’ Details

Goodman Group

Key Takeaways from Investor Newsletter: Goodman Group (ASX: GMG) is involved in making an investment in directly and indirectly held industrial property, investment management, property services, and property development. The market capitalisation of the company stood at ~A$26.12Bn as of 14^th June 2019. The company published its investor newsletter dated 12^th June 2019 wherein it highlighted the operational and development updates of the company. As per the presentation, the company delivered another strong performance for the nine months to March 2019, as customers continue to demand proximity to consumers in urban areas. Moreover, the group is focused on infill markets where the demand is strongest, which has provided the confidence to increase its work in progress (WIP) to $3.7 Bn at 31^st March. With several high-value projects in the pipeline soon to commence, the company presumes WIP to grow to over $4 Bn by June 2019. As of now,the company has 69 development projects in progress around the world.


Development Projects Work in Progress (Source: Company Reports)

The assets under management in partnerships stood at $40.8 Bn and the growth was because of revaluation gains, development completions and net acquisitions as well as exchange rates.

What to Expect: Considering the quality as well as location of the portfolio, the company is witnessing consistently high occupancy and steady rental growth. GMG is focused on expanding its land bank via strategic acquisitions in the high barrier to entry markets where the company’s portfolio is concentrated. The company is expecting that its portfolio would continue to perform strongly, and it reaffirms forecast for FY19 operating earnings per security of 51.1 cents, reflecting a rise of 9.5% on FY18. In addition, the distribution per security of 30 cents has been reaffirmed, which represents an increase of 7% on FY18.

Recently, S&P Dow Jones added GMG into the S&P/ASX 20 Index, effective from June 24, 2019.

Stock Recommendation: The development activity is currently strong and growing wherein GMG expects work in progress to reach $5 Bn in FY20 because of high-quality locations of its landbank and increasing scale of development projects.The net margin of the company stood at 92.6% in 1HFY19 in comparison to the industry median of 89.9%, which represents that the company is effectively converting its topline into bottom line as compared to the broader industry. The current ratio of the company stood at 3.97x in 1HFY19 as compared to the industry median of 0.49x. This reflects that GMG is in a decent position to address its short-term obligations. With respect to stock’s past performance, it had generated returns of 9.21% and 34.59% in the time span of one month and six months, respectively. As per ASX, the stock is trading near its 52-weeks higher levels. Hence, considering the above-stated facts and current trading level, we give an “Expensive” rating on the stock at the current market price of A$14.650 per share (up 0.411% on 14^th June 2019).
 

Scentre Group

Introduction of New Joint Venture Partner: The Scentre Group (ASX: SCG) is engaged into the development and management of property and the market capitalisation of the company stood at ~A$20.1 Bn as on 14^th June 2019. The company, with the help of release dated 20^th May 2019, announced that the Perron Group would be a new 50% joint venture partner in Westfield Burwood in Sydney. For a joint venture, the Perron Group would be paying an amount of $575 Mn for sake of its interest which represents a 4.1% premium to Scentre Group’s book value at 31 December 2018. The proceeds will initially be utilised for debts repayment.

Operating Performance (Source: Company Reports)

Future Aspects: The group has reconfirmed the forecast FFO growth for the 12 months ending 31 December 2019 of around 3%. SCG is anticipating distribution for FY19 to 22.60 cents per security, which reflects an increase of 2%.The joint venture transaction is expected to be dilutive to FFO per security in 2019 by around 0.2 cents per security.

Stock Recommendation: The Westfield Newmarket development is progressing well with staged openings to begin in early Q3 2019. The current ratio of the company stood at 0.25x in FY18, which reflects a growth of 38.2% on YoY basis. With respect to stock’s past performance, it had generated returns of 4.30% in the time span of three months and is trading close to its 52-week low of $3.630 with PE multiple of 8.77x. Hence, considering the above-stated facts and decent outlook, we give a “Buy” recommendation on the stock at the current market price of A$3.760 per share (down 0.529% on 14^th June 2019).
 

Vicinity Centres

A Quick Look on Estimated June 2019 Valuations: Vicinity Centres (ASX: VCX) is one of Australia’s leading retail property groups with a fully integrated asset management platform. Recently, the company, by release dated 7^th June 2019, published its estimated valuations for the six months ending to 30^th June 2019. The company released its estimated valuations in order to facilitate potential debt capital market raising. The overall estimated portfolio net valuation witnessed a fall of 1.3%, predominantly impacted by a decrease in the Western Australian portfolio and pre-development centres.

The impact of the valuation decline on net tangible assets per security is estimated to be 5 cents in comparison to the previously reported $2.96 at 31 December 2018. In March 2019 quarter, the specialty stores and mini majors moving annual turnover witnessed a rise of 3.3% while specialty store moving annual turnover per square metre stood at $10,939, reflecting a rise of 10.3% over the past year.


Total Moving Annual Turnover Growth (Source: Company Reports)

What to Expect: The Company’s DFO centres are expected to record solid valuation growth because of the successful product remixing. The Victoria and New South Wales portfolios are expectedto continue positive valuation trend. VCX is expecting distribution payout ratio to be at the upper end of 95% to 100% of adjusted FFO.

Stock Recommendation: The company is in the process to open a 5-star MGallery by Sofitel 250-room hotel with conference facility in November 2019. With respect to stock’s past performance, it had generated returns of 0.39% and 4.02% in the time span of one month and three months, respectively. Based on the foregoing, we give a “Buy” recommendation on the stock at the current market price of A$2.580 per share (down 0.386% on 14^th June 2019).
 

Dexus

Conclusion of Security Purchase Plan: Real Estate sector company, Dexus (ASX: DXS), formerly known as DEXUS Property Group, is into owning, managing and developing high-quality real estate assets and managing real estate funds on behalf of third-party investors. Dexus Funds Management Limited as responsible entity of Dexus had referred to the announcements made earlier on May 2, 2019, relating to fully underwritten $900 million institutional placement, and non-underwritten Security Purchase Plan to the eligible Dexus Security holders in Australia and New Zealand to garner up to $50 million and on May 8, 2019, relating to the dispatch of SPP booklet to the eligible Dexus Security holders in Australia and New Zealand. Dexus Funds Management Limited as responsible entity for Dexus has confirmed wrapping up of SPP following the closing of the SPP offer. The SPP had closed oversubscribed garnering around $63.9 million. In the release dated June 3, 2019, the SPP offer was sent to 26,774 eligible security holders and valid applications totalling around $63.9 million were received from around 4,640 security holders. The company has diversified future trading pipeline, which could help the company moving forward. It had settled on sale of 32 Flinders Street, Melbourne securing $34.7 Mn (post-tax) of trading profits for FY 2019. It had started the construction of North Shore Health Hub, which is located at 12 Frederick Street, St Leonards and it has a future trading pipeline of $210-$270 million of trading profits (pre-tax) from five trading projects.

Trading Projects (Source: Company Reports)

Prospects: The company is cautious as a result of local and global uncertainty. It is well placed to continue to add value, which is supported by positive office market fundamentals, driving high portfolio occupancy, significant pipeline of development projects creating future value and Quality unlisted partners to invest alongside through the cycle.

Stock Recommendation: The company is expecting distribution per security growth of around 5%. The energy supply agreement provides the company with long-term price certainty and drives down energy costs for its customers. Coming to the stock’s past performance, it had generated returns of 7.25% and 23.95% in the time span of one month and six months, respectively. As per ASX, the company’s stock is trading near to its 52-weeks higher levels, which could be a bit of a concern for the market players. Hence, we give an “Expensive” recommendation on the stock at the current market price of A$13.640 per share (up 0.22% on 14^th June 2019). 

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