Stockland

Q3FY19 Results in Line with Expectations: Stockland (ASX: SGP) is one of the leading diversified property groups in Australia. It owns, manages and develop a range of assets, which includes shopping centres, offices and retirement villages, etc. with a market capitalisation of ~A$10.17 Bn as on 22^nd May 2019.

Recently, by release, the company updated the market about its Q3FY19 results. The company witnessed ongoing growth in terms of quality of its portfolio along with the divestment of $284.5Mn of non-core retail town centre assets. Adding to that, SGP is working towards achieving its target of $400Mn within 12 months and is on track. It reported 3.8% growth in comparable specialty sales per square metre for year to March 2019, which reflects the success of its remixing strategy.

Although, in the challenging market conditions, the company is on track to settle more than 6,000 residential lots in FY19. In the context of residential sales, it witnessed a decline and the company is anticipating that it would remain weaker over the calendar year 2019. SGP is progressing its $740Mn logistics development pipeline. The company’s share buy back is going well and it had completed $169Mn from the target of $350Mn at an average discount to NTA of 8%.

It had experienced strong leasing activity throughout its Workplace and Logistics portfolio, with 376, 000 square metres leased for the FY.


Workplace and Logistics Sale (Source: Company Reports)

It had secured new long-term debt of A$551 Mn during the quarter at an attractive interest rate throughout the Australian and US capital markets.During the period, 5-year domestic medium-term note was issued at a coupon of 3.3 %. 

Future Aspects: The company anticipates FFO growth per security near to 5% for the full year. It is targeting distribution per security of 27.6 cents, which depicts 4% growth on FY18.The company is actively working on its planning application with respect to new Melbourne Business Park with Mount Atkinson Holdings adjacent to a residential community in Melbourne’s west. This partnership would see the delivery of one of the State’s leading new logisticsprecincts. The company has a clear focus on stablising its income.

Stock Recommendation: SGP’s strong financial position and stable A-/A3 credit ratings allow them to continue to diversify its funding sources throughout the global capital markets. Moreover, Stockland Corporation is having a decent footing when it comes to its key margins as its gross margin stood at 47.5% in 1H FY 2019 which implies a rise of 4.3% reflecting improved capability to address its operating expenses. Also, its EBITDA margin stood at 35.8% in 1H FY 2019 which implies a YoY rise of 7.9%. With respect to the stock’s past performance, it had gained a decent return of 9.51% in the past one month as on 21 May 2019. While in the span of the previous three months, the stock had delivered the return of 16.71%. Hence, considering the above stated factors and decent outlook, we maintain our “Hold” rating on the stock at the current market price of A$4.420 (up 3.756% on 22^nd May 2019).

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