Shopping centre owner and operator Scentre Group (ASX:SCG) announced strong half year results in line with forecasts as Australian specialty sales grew 6.1%.
Scentre Group is the owner and operator of Westfield in Australia and New Zealand. The company operates 43 centres with total assets under management of $40.7bn. Scentre Group was established in June 2014 as a result of a restructure of the Westfield Group.
Scentre Group’s forecast is to achieve Funds from Operations (FFO) of 22.5 cents per security (cps) for the full year. The half year ending 30 June 2015 concluded with FFO of 11.38 cps on track to achieve full year guidance. The company announced a dividend of 10.45 cps, also in line with forecasts. Total assets under management as of 30 June 2014 were $40.7bn and Scentre Group’s gearing ratio was 34.8%.
While results such as revenue and profit are not comparable due to the restructure and merger that occurred last year, FFO appears to the most suitable indicator to compare Scentre Group’s performance. Scentre Group achieved total revenue of $1.3bn and profit after tax before charges and credits in relation to the restructure was $1.1bn. Earnings per share were 20.38 cents, giving Scentre Group a price to earnings (P/E) ratio of 17.6 at yesterday‘s closing price of $3.61. The P/E is expected to drop today.
Chief Executive Officer Peter Allen is “pleased with these operational results” as he believes the group is able to drive value from its high quality assets and shopping centre portfolio. Chairman Frank Lowy said: “The business is operating efficiently and the underlying strength and quality of the assets mean the future prospects for Scentre Group remain promising.”
Management is particularly pleased with specialty sales growth of more than 6% in Australia and New Zealand. Scentre Group’s portfolio yields strong returns and the company aims to maximise returns by selling underperforming shopping centres and developing new centres in attractive areas. Quick returns in the short-term are not priority as long-term portfolio strength remains the key focus.
Scentre Group provides an attractive income opportunity with predictable income stream and low single-digit growth. SCG remains firmly on Wise-owl’s watchlist as the most recent stock market rout is expected to lower SCG’s valuation to attractive levels. Our subscribers will be informed exclusively about any buying opportunities.
Author: Simon Herrmann
Aug 25, 2015
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.