Scentre Group

SCG Details

Substantial Presence in Australia and New Zealand: Scentre Group (ASX: SCG) owns and operates a portfolio of living centers in Australia and New Zealand with 42 Westfield living centres. The Company has a real estate asset under management valued at $50bn and shopping centre ownership valued at $34.1bn. SCG's segments include property investment, and property management and construction segments. During FY20, more than 450mn customers visited SCG’s retail partners and spent nearly $22bn with the company’s retail partners.

FY20 Key Highlights: SCG has posted $22bn of revenues in FY20 as compared with $25bn in FY19, this has resulted in lower average sales per store to $1.40 mn in FY20 as compared with $1.52 mn in FY19. During the full year ending 31 December 2020, the Group has collected $2,059 million of rent in gross rent collections including $641 million during Q4FY20. SCG has collected $0.9 bn and $1.2bn of gross rental billings in the 1H and 2H 2020, respectively. SCG has registered a 95.7% growth in net operating cash flows during 2HFY20 to reach at $771mn. SCG has registered a gross operating cash inflow of $2,357 mn during FY20.

Gross Rent Collection (Source: Company Reports)

Outlook: SCG is expecting to distribute at least 14.00 cents per security in FY21. As per the company report, the distribution is expected to grow in future years. At the same time some of the group’s earnings will be retained to meet operating and leasing capital expenditure, reduce net debt and fund strategic initiatives.

Valuation Methodology: EV/Sales Multiple based Relative Valuation (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, SCG has decreased by 0.69% and 3.07% in the last three months on ASX. The stock is currently trading below the average 52-weeks’ price level range of $1.350-$3.730. On the technical analysis front, the stock has a support level of ~$2.66 and resistance of ~$2.98. We have valued the stock using an EV/Sales 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 some premium as compared to its peer median, considering a leading presence in Australia and New Zealand, robust real estate portfolio, High yield rental income and decent FY20 results. For the purpose we have taken peers such as, Goodman Group (ASX: GMG), Charter Hall Group (ASX: CHC), to name few. Considering an increase in rent collection YoY during full year 2020, Major presence across Australia and New Zealand regions, increase in cash inflows, current trading level, and valuations, we give a “Buy” rating on the stock at the current market price of $2.84, down by 1.046% as on 24 February 2021.

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

Mcgrath Limited

MEA Details

Exhibited Strong Business Growth: Mcgrath Limited (ASX: MEA) is engaged in real estate services. MEA operates mainly into mortgage broking, property management, agency sales and career training services. MEA has posted an underlying EBITDA of $6.6mn in 1HFY21, an increase of $5.0mn from 1HFY20. The company has posted profits in 1HFY21 as compared with losses of $1.0mn in 1HFY20. The company has posted a 16% rise in its revenues to $56.7mn for 1HFY21 and 23% growth in sales per agent despite lower listing volumes during the period. The company has no debt on its balance sheet with a cash balance of $24.6mn which has grown by $7.4mn since June 2020. MEA posted a growth in number of properties sold to 6,900 in 1HFY21 as compared with 5,768 in 1HFY20. The company has sold 410 properties which were under management.

Revenue Growth (Source: Company Reports) 

Outlook: As per the company reports, the company is expecting an improved consumer sentiment with a strong growth in the prices. On back of positive first seven weeks of 2H, MEA is expecting a strong demand from the customers. The company is expecting a lower interest rate scenario with limited number of houses on sale in the market and see a demand coming from the occupier. 

Stock Recommendation: MEA has announced recommencement of dividend after posting a decent results. The company has declared a 0.5c per share interim fully franked dividend. In the last one month, share of MEA has gone up by 25.49% and by 52.38% during the last three months on ASX. The stock is currently trading above the average 52-weeks’ price range of A$0.160-A$0.740. On the technical analysis front, the stock has a support level of ~A$0.551 and resistance of ~A$.745. Considering the spike in the stock price over past months, and current trading level, we are of the view that most of the positive factors of the company have been discounted at the current juncture. Hence, we suggest investors to wait for better entry level and give an “Expensive” rating on the stock at the closing price of $0.640, down by 1.539% on 24 February 2021.

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

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