Vicinity Centres
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VCX Details
Accelerating portfolio enhancement with up to $1 billion of asset sales: Vicinity Centres Re Ltd.’s (ASX: VCX) stock has risen 9.84% in three months as on June 07, 2018. The company is now adjusting its portfolio and has planned for the sale of up to $1.0 billion of Sub Regional and Neighborhood shopping centres. The sale proceeds will be reinvested into value-accretive development opportunities, including The Glen and Box Hill Central in Melbourne, Galleria in Perth, and Chatswood Chase and Bankstown Central in Sydney. VCX’s focus is on ongoing portfolio enhancement and to deliver superior income and sustainable long-term capital growth for the shareholders. The company has appointed JLL as the real estate advisor and coordinator of the asset sales process, working with Macquarie Capital as its corporate advisor on the asset sales program. Meanwhile, VCX has highlighted FFO guidance for FY18 of 18.2 cents per security, which is the top end of the previously announced guidance range. The distribution guidance for FY18 is the payout of 100% of adjusted funds from operations (AFFO).
Moreover, in the March Quarter 2018, VCX came up with a premium retail offer across Australia’s three largest CBDs after the settlement of a strategic exchange of Sydney premium assets with GIC. For Chadstone, which is ranked Australia’s number one shopping centre by moving annual turnover (MAT) for 17th consecutive year, MAT rose 24% to $1.99 billion. DFO portfolio, which is Australia’s leading Outlet Centre portfolio, MAT is up 4.6% in the March quarter. The Specialty store MAT is showing signs of improvement and is up 0.4% for the 12 months to 31 March 2018, compared to -0.7% to 31 December 2017, due to 1.9% growth for the quarter. Additionally, Chadstone major development ($666 million completed in June 2017) yield improved to 7.0%, and has exceeded feasibility expectations. It is in final stage of Mandurah Forum and stage two of The Glen successfully opened and is trading strongly. The company had continued divestment of non-core assets in the march quarter, with the sale of Brandon Park, VIC for a 3.8% premium to December 2017 book value. Further, VCX has launched Australia’s largest investment in solar energy generation for shopping centres, i.e., $28 million across South Australia (SA) and Western Australia (WA).
Looking at the scenario, the group seems to be working on its capital management and portfolio rebalancing to help generate better returns to shareholders. However, we believe that it might be better to wait and watch for further developments. As of now, we give an “Expensive” recommendation on the stock at the current price of $ 2.62 (down 2.2% on June 08, 2018).
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