Five lucky REITs with reliable yields

Scentre Group Ltd

 

SCG Details

Outlines good development pipeline: Scentre Group Ltd (ASX: SCG) enhanced its stake in Carindale to 52.8%. The group also put Auckland’s Westfield WestCity up for sale and expected to fetch up to $175 million. By selling the shopping centre, the group is reducing its exposure to New Zealand. In November last year, the group had sold 3 Westfield malls for $549 million. On the other side, the group divested $2.3 billion of assets that did not meet the group’s long-term strategy. Moreover, SCG jointly with Cbus Property has purchased the David Jones Market Street building in Sydney’s CBD for $360 million wherein the group’s share is $182.5 million.
 Major developments (Source: Company Reports)
 
David Jones would continue to occupy the property till 2019 under lease agreements providing 4.5% rental return on acquisition price. Totally the company acquired $1.1 billion of high quality CBD and regional shopping centers. The group’s over 80% of portfolio generates annual sales in excess of $500 million and over 70% of portfolio generates average specialty sales productivity in excess $10,000 per square meter. We recommend a “Hold” at the current market price of - $4.74
 

SCG Daily Chart (Source: Thomson Reuters)
 

Arena REIT No. 1

 

ARF Details
Project pipeline and dividend guidance: Arena REIT No. 1 (ASX: ARF) announced a distribution guidance of $0.117 per security for its fiscal 2017, representing a 7.4% rise over the $0.109 per security paid in 2016. For FY16, ARF generated an operating profit of $25.6 million, up 16% on a year on year (yoy) basis while statutory net profit was at $72.6 million, rising by 19% as compared to the prior corresponding periods.

 
Development Pipeline (Source: Company Reports)
 
The improvement was driven by $51.1 million increase in property valuation across Arena’s portfolio. Arena completed four development projects in FY16 at total costs of $19.1 million. The company has 14 projects in its development pipelines worth $52 million with all leases pre-commitment in place. The growth in rental income drove EPS by 9% in FY16. ARF payout ratio was stable at 98% distributing 10.9 cents per security. After touching high in August, the stock is in correction mode for last one month and fell over 5.56% (as of September 28, 2016). We recommend a “Hold” at the current market price of - $1.97
 

ARF Daily Chart (Source: Thomson Reuters)
 

Charter Hall Retail REIT

 

CQR Details
Acquisition and rise in portfolio:Charter Hall Retail REIT (ASX: CQR) completed an overall acquisition of $228 million in FY16 and registered a 17.9% rise in portfolio value to $2.55 billion. Occupancy rate was stable at 98%.
 

FY16 Annual result (Source: Company Reports)
 
The company is recycling its capital from non-core properties to larger, higher growth properties and has disposed-off two non-core properties for $20.3 million at a yield of 6.5%. Wesfarmers and Woolworths are their top tenants representing 50.7% of base rent. The company declared a dividend of 14 cents per share. We recommend a “HOLD” on the stock at the current market price of - $4.22
 

CQR Daily Chart (Source: Thomson Reuters)
 

National Storage REIT

 

NSR Details

Acquisition of $630 million portfolio:National Storage REIT (ASX: NSR) reported that its affiliates trust has formed joint venture with major state pension fund to acquire the 66 property portfolio of iStorage for $630 million approx. The portfolio contains about 4.5 million square feet of rentable space in over 36,000 storage units across 12 states and 24 markets with occupancy rate of 86%. In June, the company inks $190 million for 29 properties in six states. It is also acquiring Kurnell and Moonah Central for total purchase consideration of about $20.75 million. The company raised $260 million to fund the acquisitions. For FY16, overall revenue increased 25% to 79.8 million and underlying earnings was at $29.2 million, up 20% on FY15. EPS was at 8.7 CPS. For FY17, the management guided underlying earnings of $45.5 - $46.5 million delivering EPS growth in the range of 5.8% - 8% on FY16. The company declared a dividend of 4.4 cents per share for FY16. We rate the stock as a “Speculative Buy” at the current market price of - $1.61
 

NSR Daily Chart (Source: Thomson Reuters)
 

Stockland Corporation Ltd

 

SGP Details

Strong dividend payout:Stockland Corporation Ltd (ASX: SGP) reported a statutory profit of $889 million and an underlying profit of $660 million for FY16. The company has paid a dividend of 24.5 cents for FY16, reflecting about 86% of payout. RoE for FY16 stands at 11% which is up from 9.9% in FY15 while FFO per security comes to 31.1 cents. SGP’s retail portfolio has $681 million developments under construction. Logistic and Business parks account for 25% of portfolio and have over 330,000 sqm of leasing activity under active management. We rate the stock as a “Hold” at the current market price of - $4.70
 

SGP Daily Chart (Source: Thomson Reuters)

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