Stocks’ Details

Scentre Group

Sizeable Presence in Australia and New Zealand: Scentre Group (ASX: SCG) owns and operates a portfolio of living centers in Australia and New Zealand with retail real estate AUM valued at more than $50bn and shopping centre ownership interests valued at $34.2bn. The Company’s portfolio includes approximately 42 Westfield living centers and over 12,000 retail outlets. SCG’s segments include property investment, and property management and construction segments.

Increase in Rent Collection: During the 10 months ended 31 October 2020, the Group collected $1,621 million of rent, an increase of $746 mn since 30 June 2020. SCG has collected $187 million and $203 million of gross rental billings in the months of September and October, respectively.

Gross Rent Collection (Source: Company Reports)

Outlook: SCG is having ownership of 7 of the top 10 centers in Australia and 4 of the top 5 in New Zealand. SCG is strategically located with its group’s network of 42 Westfield Living Centres with more than 16 million people living within a 30-minute drive of one of our centers. Scentre Group is now included in 2021 Bloomberg Gender-Equality Index. This is the second consecutive year SCG has been included in the index.

Valuation Methodology: EV/Sales based Relative Valuation (Illustrative) 

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

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: In the last 1 month, SCG has decreased by -1.41% and increased by 15.76% in the last 3 months on ASX. The stock is currently trading above the average 52-week price level range of $1.350-$3.930. On the technical analysis front, the stock has a support level of ~$2.619 and resistance of ~$2.954. We have valued the stock using an EV/Sales multiple based multiple based illustrative valuation method and have arrived at a target price of low double-digit upside (in % terms). For the purpose we have taken peers Mirvac Group (ASX: MGR), Goodman Group (ASX: GMG), and Charter Hall Group (ASX: CHC), etc. Considering an increase in rent collection YoY during the first ten months ending Oct 2020, major presence across Australia and New Zealand regions, current trading level, and valuation, we give a “BUY” rating to the stock at the current market price of $2.79, down by 1.06% as on 8 Feb 2021.

LendLease Group

Increase in Funds Under Management: LendLease Group (ASX: LLC) is an integrated international property and infrastructure company. Its segments include Property Development, Infrastructure Development, Construction, and Investment Management. LLC is posting a consistent increase in its investments and Funds Under management. LLC has A$23.6bn of funds under management in FY16, which has increased to A$36bn in FY20. Similarly, the investments increased to $4bn in FY20 from $3bn in FY19. The development pipeline grew significantly during the year from $76bn to $113bn. Along with the $4 billion of investments and $29 billion of assets under management, the Investments segment is expected to provide a solid base of recurring earnings.

Business Growth (Source: Company Reports) 

Outlook: The operating performance of the construction segment is expected to improve in FY21. The workbook remains substantial with backlog revenue of $14 billion. Approximately 75% of major project backlog will generate future revenue and margin for the Construction segment, with a margin on the remainder that is derived from integrated projects.

Valuation Methodology: PE Based Multiple Based Relative Valuation (Illustrative) 

PE Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: In the last 1 month, LLC has decreased by 4.84% and -4.76% during the last 3 months on ASX. The stock is currently trading below the average 52-week price level range of A$9.34-$19.45. On the technical analysis front, the stock has a support level of ~$11.85 and resistance of ~$12.90. We have valued the stock using the P/E multiple based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For the purpose, we have taken peers Charter Hall Group (ASX: CHC), Mirvac Group (ASX: MGR), Goodman Group (ASX: GMG) and more. Considering an incremental funds under management and investments over a period, current trading level, and valuation, we give a “BUY” rating on the stock at the current market price of $12.38, down by 0.56% as on 8 Feb 2021. 

GDI Property Group

Maintaining Positive Cash Flows: GDI Property Group (ASX: GDI) is a fully integrated, internally managed property and funds management group with capabilities in ownership, management, refurbishment, leasing and syndication of properties. GDI is maintaining positive cash flows during the last 2 years. The company has a positive operating cash flow of A$46.20mn in FY20 and GDI trust also has a positive operating cash flow of A$49.11mn in FY20.

Operating Cash Flows (Source: Company Reports)

High Occupancy Rate for Property Portfolio: The wholly owned portfolio was independently valued at $771.5mn, each of Mill Green (+$13.0 million to $343.0 million), Westralia Square (+$42.5 million to $327.5 million) and 50 Cavill Avenue (+$1.0 million to $101.0 million) properties are revalued at least once in a year. These properties have been well inhabited with more than 80% occupancy rate at each of their properties portfolio.

Outlook: GDI’s portfolio has several leasing opportunities to capitalize on the anticipated positive absorption in the Perth market where the new supply is limited and sound demand prospects and with a very strong balance sheet, GDI’s outlook in FY21 and beyond looks promising.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

P/E Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: In the last 3 months, GDI has increased by 5.50% on ASX. The stock is currently trading below the average 52-week price band of A$0.815-A$1.560. On the technical analysis front, the stock has a support level of ~$1.03 and resistance of ~$1.221. We have valued the stock using P/E multiple based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For the purpose, we have taken peers Centura Group Ltd (ASX: CNI), Goodman Group (ASX: GMG), Charter Hall Group (ASX: CHC), etc. Considering the higher revenues, positive net cash flows, current trading level, and valuation, we give a “Speculative Buy” rating to the stock at the current market price of $1.15, up by 2.22% as on 8 Feb 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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