Unibail-Rodamco-Westfield

URW Details

Appointment of New Chairman: Unibail-Rodamco-Westfield (ASX: URW) is a well-known global developer and operator of flagship destinations, with a portfolio of €58.3 billion as on 30^th September 2020. The market capitalisation of the company stood at ~$13.26 billion as on 19^th November 2020. Recently, the company appointed Mr Jean-Marie Tritant on the position of Chairman of the Management Board of URW and Group CEO, which will be effective from 1^st January 2021. During 1H FY20, the reported Adjusted Recurring Earnings per Stapled Share (AREPS) stood at €4.65, reflecting a fall of 28% over 1H FY19, mainly due to disposals made in 2019 and 2020 and the impact of COVID-19 on operations and financing. As on 30^th June 2020, the Gross Market Value (GMV) of URW’s assets stood at €60.4 billion on a proportionate basis. This includes a like-for-like portfolio revaluation of -€2,768 million, a non-LFL revaluation of -€658 million, and the impact of disposals. During the half-year, vacancy increased by 140 bps to 6.8% in spite of an elevated level of tenant bankruptcies.

Key Financials (Source: Company Reports)

Outlook: URW possesses significant flexibility, with committed projects of €3.6 billion, out of which €2.0 billion has already been invested. In addition, the company is planning to deliver five projects in 2H FY20 with a total investment cost (TIC) of around €830 million.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: URW ended the half-year 2020 with cash and undrawn available credit lines of €12.7 billion. The company accessed the debt markets in the month of April and June 2020 and issued a total of €2.2 billion Euro senior bonds with an average coupon of 2.27% and an average maturity of 9.3 years. The 52-week low-high range for the stock stands at $2.410 - $11.730, respectively.  On a technical analysis front, the stock of URW has a support level of ~$3.63 and a resistance level of ~$5.59. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price, which is offering a correction of low single-digit (in percentage terms). For the purpose, we have taken peers such as Vicinity Centres (ASX: VCX), Carindale Property Trust (ASX: CDP), and Charter Hall Retail REIT (ASX: CQR), to name a few. Hence, we are of the view that most of the positive factors have been discounted at current trading levels and give an “Expensive” rating on the stock at the current market price of $4.760 per share, down by 0.627% on 19^th November 2020. We further suggest investors to wait for better entry levels.

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

Charter Hall Retail REIT

CQR Details

Decent Sales Growth in Q1 FY21: Charter Hall Retail REIT (ASX: CQR) is engaged in the business of investing in convenience retail properties in Australia.  The market capitalisation of the company stood at ~$2.18 billion as on 19^th November 2020. During Q1 FY21, the company witnessed decent sales performance with an overall growth of 5.7%, which reflected the essential role of its centres in the communities. Supermarkets growth for the period stood at 8.9%. In addition, the company reported a portfolio occupancy of 97.3%, reflecting the resilience and quality of the company’s portfolio.  CQR continued its positive trajectory in returning to normal rent collection levels. During the three months period, the company has collected 92% of Q1FY21 gross rent.

Sales Growth (Source: Company Reports)

Capital Raising in FY20: During FY20, the company’s operating earnings stood at $142.7 million, reflecting a fall of 1.8% over FY19. Net cashflow from operating activities for the year stood at $132.9 million. During the year, the company raised equity twice, wherein, first equity raising was of $100 million in the month of February 2020 for growing its investment in the bp portfolio and improving the defensiveness and resilience of its income stream. The company raised an additional $304.5 million in April 2020 to ensure the balance sheet in a decent position to pass through any valuation or earnings impact from COVID-19.

Guidance: Considering the current cash collections, the company is likely to pay a distribution of around 10.7 cents per unit in 1H FY21. In addition, the company is expecting the distribution amount for 2H FY21 to be greater than the first half of FY21 by assuming that there will be no further lockdown or government-imposed trading restrictions. The company continues to aim at scope 1 and scope 2 net zero carbon emissions by 2030 across the Charter Hall platform.

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months 

Stock Recommendation: As on 30^th June 2020, the company had liquidity of $434 million, which comprised of cash and undrawn debt facilities. The company ended FY20 with weighted average debt maturity of 3.9 years and no debt maturing until FY22. The stock of CQR has provided positive returns of 8.07% and 19.75% in the last one and three months, respectively. We have valued the stock using the price to earnings multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). On a technical analysis front, the stock of CQR has a support level of ~$3.62 and a resistance level of ~$4.34. Therefore, considering the decent sales growth in Q1FY21, capital raising in FY20, expected distribution payment and outlook, we give a “Buy” recommendation on the stock at the current market price of $3.880 per share, up by 1.305% on 19^th November 2020.

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

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