Goodman Group

GMG Details

Robust Quarterly Performance: Goodman Group (ASX: GMG) is engaged in property business across the world. The company is primarily engaged in property investments held directly and indirectly. The company's operating regions are Australia and New Zealand, Asia, Continental Europe, United Kingdom and Americas. The company has witnessed a robust operational performance during Q3FY21. GMG has registered an increase in its total Assets Under Management (AUM) to $52.9bn as at 31 March 2021, whereas total AUM in FY20 were at $51.6bn. Notably, high occupancy of 98% and strong cash flow growth has resulted in enhanced valuations for its assets. GMG has seen a consistent rise in its development workbook from $3.5bn in FY17 to $6.5bn in FY20 and lately $9.6bn in Q3FY21.

Assets Under Management (Source: Company Reports)

1HFY21 Financial Highlights: The company has registered an increase in its revenue and other income to $1,885.7mn in 1HFY21 against $1,391.6mn in 1HFY20 on the back of a significant rise in development income. The company has seen an increase in its profits to $1,041.5mn in 1HFY21 against $810.6mn in 1HFY20. GMG has witnessed a decline in its cash and cash equivalent position to $1,275.2mn as on 31 December 2020 against $1,781.9mn as on 30 June 2020.

Change in Director’s Interest: As per the company’s reports on 16 April 2021, GMG’s Director, Mr. Stephen Johns has increased its indirect shareholding in Canzak Pty Limited. After the acquisition (Part Disposal), Mr. Johns holds 725 GMG stapled securities by Canzak Pty Limited and 418 GMG stapled securities by JFSF SMA.  

Key Risks: The company operates in multiple countries and holds interest-bearing liabilities. Thus, any severe movement in foreign exchange prices and in interest rates may result in financial losses for the company.

Outlook: GMG is in a strong financial position with low gearing. GMG expects its operating profits at $1.2bn for FY21, indicating an EPS growth of 12% YoY. The company expects to distribute 30 cents per share for FY21. 

Valuation Methodology: EV/Sales 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: The stock of GMG gave a return of ~3.60% in the last one month and a return of ~6.71% in the last three months. The current market capitalisation of GMG stands at ~$35.43bn as of 7 May 2021. The stock is currently trading above the average 52-weeks’ price level range of ~$13.79-~$20.07. On the technical analysis front, the stock has a support level of ~$18.56 and a resistance of ~$20.08. We have valued the stock using an EV/Sales 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 an increase in revenue and an enhanced valuation for its assets. For this purpose, we have taken peers Dexus (ASX: DXS), ALE Property Group (ASX: LEP), BWP Trust (ASX: BWP), to name a few. Considering the company has seen an increase in AUM in Q3FY21, high occupancy of 98% in Q3FY21, an increase in development workbook in the same period, current trading levels and valuation, we recommend a “Hold” rating on the stock at the current market price of $19.24, up by ~0.312% as on 7 May 2021.

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

Scentre Group

SCG Details 

An Update on Q1FY21: Scentre Group (ASX: SCG) is engaged in property investments by owning and operating a portfolio of living centers in Australia and New Zealand. SCG has witnessed a growth of 6.3% YoY (Specialties) across regions for In-store sales in Q1FY21. Similarly, the company has witnessed  growth among most of the retail segments in its total portfolio in Q1FY21. The company has seen an increase in gross rent collection as on 30 April 2021 YTD to $802mn against $633mn as on 30 April 2020 YTD. SCH gas reported a strong portfolio occupancy of 98.5% leased as at 31 March 2021.

Dividend Declaration: SCG has paid a dividend of $0.07 per share despite incurring a loss in FY20. The company has paid the dividend on 26 February 2021.

FY20 Financial Highlights: The company has registered a decline in its revenue to $2,162.3mn in FY20 against $2,616.4mn in FY19, majorly due to a decline in property revenue. SCG has incurred a loss of $3,772.0mn in FY20 due to lower revenues and higher expenses. SCG has seen an increase in its cash and cash equivalent position to $378.1mn as on 31 December 2020 against $252.0mn as on 31 December 2019.

Cash Position (Source: Company Reports)

Key Risks: The company is exposed to liquidity risk. There is always a risk for the company to get failed in meeting its financial obligations as and when they are due to pay. The company operates in multiple countries. Any severe movement in foreign exchange prices may lead to financial losses for the company.

Outlook: SCG expects to distribute 14.0 cents per share for 2021, which is likely to grow in future years, subject to no material change in conditions. The group is likely to retain its earnings to cover operating and leasing capital expenditure and reduce its debt. 

Valuation Methodology: EV/Sales 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: The stock of SCG went down ~5.19% in the last one month and ~2.83% in the last three months. The current market capitalisation of SCG stands at ~$13.96bn as of 7 May 2021. The stock is currently trading slightly above the average 52-weeks’ price level range of ~$1.880-~$3.130. On the technical analysis front, the stock has a support level of ~$2.449 and a resistance of ~$3.124. 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 a slight discount as compared to its peer median, considering a decline in revenue in FY20, incurred a loss in the same period and a decline in funds from operations in FY20. For this purpose, we have taken peers Aventus Group (ASX: AVN), Goodman Group (ASX: GMG), GPT Group (ASX: GPT) to name a few. Considering the company has paid a dividend despite registering a loss in FY20, increase in gross rent collection as at 30 April 2021 YTD, expectation of higher dividend distribution in FY21, current trading levels, and valuation, we recommend a “Buy” rating on the stock at the current market price of $2.74, up by ~1.858% as on 7 May 2021.

SCG Daily 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.

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