Charter Hall Group

CHC Details

Change in Shareholding: Charter Hall Group (ASX: CHC) undertakes investment and management of property funds and development investment. CHC notified that Cohen & Steers, Inc (and all companies controlled by the company) ceased to be a substantial shareholder in CHC as of 7 July 2021.

FUM Valuation Update:

• CHC reported that the Valuation of its Group FUM platform would increase by $3.3 billion, leading to an estimated Group FUM of ~$52 billion as of 30 June 2021.
• The company posted a growth of $12 billion, up 28% YoY in the Group FUM during FY21.
• CHC will announce the results of FY21 on 23 August 2021.

Dividend Update:

• CHC will distribute 31 cents per security (cps) for 2HFY21 (half year ended 30 June 2021).
• The company will distribute 37.86 cents per security, up by 6% YoY for FY21, ending on 30 June 2021. CHC will pay the distributions on or around 31 August 2021.

Key Takeaways from 1HFY21:

• A Decline in Revenue: CHC reported a decline of 30.4% YoY in revenue to $248.3 million due to lower investment management revenue earned from the property funds management in 1HFY21.
• Fall in NPAT: The NPAT reduced by 44.7% YoY to $173.2 million in 1HFY21.
• Higher Cash Receipts: CHC generated $260 million cash receipts in 1HFY21 vs $210.5 million in 1HFY20. The net cash from operating activities dipped to $90 million in 1HFY21 from $98 million in 1HFY20.
• Distributions: CHC paid a dividend and distribution of 18.55 cents per stapled security in 1HFY21.

Revenue & Statutory NPAT Trend from FY18-FY20; (Analysis by Kalkine Group)

Key Risks:

• Financial Risks: The company faces the risk of changes in interest rate, liquidity crunch/excess supply, and credit risk on its financial instruments.
• Regulatory Risks: As an investment management company, CHC faces regulatory reforms /changes by authorities.

Outlook:

• Based on no significant change in the market conditions, CHC has upgraded the guidance for post-tax operating earnings per security to no less than 57 cents per security (cps) from 55 cps given previously for FY21.
• For FY22, CHC has a robust pipeline off-market and via its development book. The company has considerable investment capacity across its platform.

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

Source: 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 CHC gave a positive return of 19.13% in the past nine months and a positive return of 47.19% in the past year. The stock is currently trading closer to its 52-weeks’ high level of $16.970. The stock has a support level of $14.70 and a resistance level of $20.50. We have valued the stock using the Price to Earnings multiple-based illustrative relative valuation method and have arrived at a target price with a correction of high single-digit (in % terms). We believe that the company can trade at a slight premium than its peer median, considering the higher forecasted valuation in the Group FUM platform, estimated Group FUM in FY21, and upgraded guidance for distribution per security for FY21. For this purpose, we have taken peers like Mirvac Group (ASX: MGR), Arena REIT No 1 (ASX: ARF), BWP Trust (ASX: BWP), and others. Considering the high trading levels, decent price returns in the past nine months and the past year, and valuation, we suggest investors book profit and give a ‘Sell’ rating on the stock at the current market price of $16.790, as of 11 August 2021, 10.42 AM, Sydney, Eastern Australia.  

CHC Daily Technical Chart, Data Source: REFINITIV  

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: 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.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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