Stockland Corporation Limited
SGP Details
3QFY22 & 1HFY22 Updates: Stockland Corporation (ASX: SGP) is involved in development and management of residential and commercial property assets. It operates through five segments - Commercial Property, Residential, Land Lease Communities, Retirement Living, and Others.
- With the focus on accelerating the development pipeline and scale capital partnerships to generate long-term sustainable growth, its communities business maintained positive price momentum and elevated enquiry levels during the quarter. While the Commercial Property portfolio achieved high occupancy and rent collection rates, thereby recorded a 95% rent collection for 3Q22.
- With the skew to 2H for Residential settlements and step-up in land acquisition payments, the operating cashflow was recorded as $172 million in 1HFY22 as compared to $475 million in 1HFY21. Net sales in the Residential segment were recorded as 3,815 in 1HFY22.
FFO Summary (Source: Analysis by kalkine Group)
Key Risks: Rising interest rates may affect affordability and impact sales volume. Higher financing costs may impact the construction pipeline.
Outlook: The company expects residential market conditions to be positive with continued elevated demand. With the rising interest rates conditions are expected to be moderate in the medium term and expects to maintain the FFO per security in the range of 35.1 – 35.6 cents for FY22. Distribution per security to fall within the target payout ratio of 75% to 85% of FFO. With uncertainty in the market, the company has following expectations:
- Residential settlements targeting close to 6,000 lots
- Residential operating profit margin above 18%
- Land Lease Communities delivering 220-240 home site settlements in FY22
- Commercial Property rent collection trends continue at current levels
Valuation Methodology: P/E 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 SGP is trading near its 52-week low of $3.730, therefore creating an opportunity to accumulate. The stock has been corrected by ~13.46% in the past six months. The stock has been valued using a P/E multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at a slight discount to its peers’ average, P/E multiple, considering the COVID-19 uncertainties, rising interest rates and real estate demand risks, etc. For the purpose of valuation, a few peers like Mirvac Group (ASX: MGR), Vicinity Centres (ASX: VCX), and Scentre Group (ASX: SCG) have been considered. Considering the expected upside in valuation, elevated demand in the real estate market, growing earnings and net margins, optimistic long-term outlook for residential market, and current trading levels, we recommend a ‘Buy’ rating on the stock at the closing market price of $3.730, down by ~0.533%, as on 8th June 2022.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
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SGP Daily Technical Chart, Data Source: REFINITIV
Eagers Automotive Limited
APE Details
Eagers Automotive Limited (ASX: APE) is involved in the sales of new and used motor vehicles, distribution and sale of parts, accessories and car care products, repair and servicing of vehicles.
ACT Acquisition: In order to strengthen company’s geographic diversity and offering scale and future growth, the company has signed a binding agreement with WFM Motors Pty Ltd to acquire a portfolio of dealerships of Australian Capital Territory (ACT) for a consideration of $193 million. The acquisition is supposed to get completed in July 2022.
A Sneak Peek at FY21 Performance:
- APE recorded a revenue of $8,663.5 million from operating activities as compared to $8,749.7 million in FY20. The company benefited from the strong demand prevailing and exceeding the supply, which has increased the record book by ~25% since 31st December 2021.
- Reflecting strong market dynamics and a disciplined focus on maximizing operational performance the company recorded statutory net profit before tax from continuing operations amounted to $456.8 million in FY21 as against $280.11 million in the prior year.
Financial Summary (Source: Analysis by kalkine Group)
Key Risks: The company’s future growth could be hampered by the instability in the demand and supply as it operates in a dynamic environment with extreme competition. Despite the strong market demand, positive operational metrics and record order book, the company expects a reduction in the number of new vehicles delivered in 1HFY22.
Outlook: The company expects an impact on the supply of the new vehicles based on the global events like on-going shortage of semi-conductor shortages in the industry. As a result, APE expects to achieve its underlying operating profit before tax from continuing operations for 1HFY22 in the range of $183 million to $189 million. On statutory basis, NPBT is likely to be in the range of $225 million and $240 million as compared to $267.4 million on pcp basis.
Valuation Methodology: P/E 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 APE is trading below its 52-week low-high average of $9.920 - $17.500, respectively. The stock has been corrected by ~29.02% in the past six months. The stock has been valued using a P/E multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at a slight discount to its peers’ average, P/E multiple, considering the COVID-19 uncertainties and other material business risks related to semi-conductor availbility, etc. For the purpose of valuation, a few peers like Peter Warren Automotive Holdings Ltd (ASX: PWR), ARB Corp Ltd (ASX: ARB), and GUD Holdings Ltd (ASX: GUD) have been considered. Considering the expected upside in valuation, rising demand, improving new vehicle market, growing earnings, optimistic long-term outlook, and current trading levels, we recommend a ‘Buy’ rating on the stock at the closing market price of $9.930, down by ~2.742%, as on 8th June 2022.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
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APE Daily Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV
Note 2: Investment decisions 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.
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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