Stockland

Robust growth in FFO & MAT: Stockland (ASX: SGP) had disclosed that an additional 440,601 stapled securities have been bought back and have been cancelled in the on-market buyback event. Hence, a total of 29,231,131 stapled securities have been bought back from the date of commencement of this programme, i.e., 24 September 2018, and now, there are 2,405,238,145 securities outstanding post this buyback. Besides this, for Q1 FY19, the company faced headwinds in the form of contraction in the residential trading conditions. This was evident from the fall in net deposits over the period fell due to the tightening of lending norms by the financial institutions. The company is rated highly in the Retirement Living Resident Satisfaction score to which it scored 8.6 points out of 10. The firms' commercial retail portfolio witnessed a growth in the Moving annual turnover (MAT) of 420 Bps for the 12 months period to September. This growth was on account of the remixing & the development activity undertaken.

 

Residential Communities - Net deposits by state (Company Reports)
 
Going forth, the firm has confirmed that it is on track to deliver profits, which would be in line with the guidance stated for FY 2019. The company expects that it will comfortably achieve the Funds from Operations per security growth of 5-7 percent for the full year. The company has also got targets of distribution per security of 27.6 cents, which in turn represents a 4 percent growth as compared to FY18. Moreover, the company is trading at a price/ cash flow ratio of 12.50 times, which is at a relative discount with the Industry median of 15.40 times, hence from the cash flows generation aspect the stock seems to have an upside potential at current valuations. Also, the Net Debt-to-EBITDA ratio stood at 4.450% which is much better than the Industrial median & signifies that the company has a comparatively less financial risk.

Meanwhile, the stock has receded by 7.25% in the past six months, as on 29 January 2019. Hence, considering the robust growth achieved in the FFO & MAT and better than industry P/CF multiple, we maintain our “Hold” recommendation on the stock at the current market price of $3.85.
 
 

Cromwell Property Group

Long term stable AUM’s leading to stable recurring annual revenues: Cromwell Property Group (ASX: CMW) had disclosed that it is extending it's on market buyback programme. Now the programme will continue until the 17th of January 2020, unless the maximum securities have been bought back or the company ceases the buyback earlier. A maximum of 194,325,974 stapled securities are targeted for the buyback. Moreover, the Board of Directors announced that the company will distribute quarterly dividend of $0.018125 per share which will be paid on February 22, 2019 with record of December 31, 2018.


CMW’s FY18 Financial Highlights (Company Reports)
 
Total assets under management (AUM) increased by 14% on a YoY basis to reach $11.5 billion. This growth was driven predominantly by the successful IPO of the Cromwell European REIT. For FY 2019, the company has guided operating profit of at least 8.00 cents per security (cps). The company has also provided with the distribution guidance of not less than 7.25 cps. Moreover, the company is trading at a price/ cash flow ratio of 13.80 times, which is at a relative discount with the Industry median of 15.40 times, hence from the cash flows generation aspect the stock seems to have potential upside at current valuations. Also, the dividend yield stood at 7.20% which outperforms the Industrial median of 5.6%; this signifies that the company is undervalued.
 
Meanwhile, the stock has receded by 4.74% in the past six months, as on 29 January 2019. Hence, considering the robust dividend yields, better than industry P/CF multiple, and spectacular growth witnessed in the AUM’s, we put “Buy” recommendation on the stock at the current market price of $1.07 per share.
 

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