Morningstar

Morningstar, Inc.

Equity Bottom-Up

Scentre Group reported 2019 earnings on a funds from operations, or FFO, basis of AUD 24.24 cents per security, up 3.9% and in line with guidance from a year ago of 4% growth. Guidance is for growth in comparable net operating income of 2.5%, FFO growth of 3%, and distribution growth of 2% to AUD 22.6 cps. We’ve made minor revisions to our forecasts to account for the timing of the delivery of AUD 810 million of redevelopments in the second half of 2018. Our forecasts align with guidance. There…

The sluggish tenant sales across Scentre Group’s portfolio have continued with no sign of a rebound during the September quarter. Guided 2018 earnings on a funds-fromoperations basis were reaffirmed to increase by approximately 4% and distributions will be AUD 22.16 cents per security. Our 2018 forecasts align with guidance and our fair value estimate remains at AUD 3.85, marginally below narrow-moat-rated Scentre's current price of AUD 4.00.
Analyst: Tony Sherlock

Scentre Group reported first-half fiscal 2018 funds from operations, or FFO, of AUD 12.38 cents per security, up 3% on the prior corresponding period. Distribution growth was lower at 2% to AUD 11.08 cents per security for the half as Scentre retains more cash to help fund developments. Our fair value estimate is unchanged at AUD 3.85. At current levels Scentre screens as fairly valued, with the guided 2018 distribution of AUD 22.16 cents per security representing a yield of 5.3%. Forecast…

There was nothing in narrow-moat Scentre Group’s market update to cause us to revise our long-term thesis, which is that well-located shopping centres will remain relevant and vibrant destinations over the longer term. However, changing consumer spending patterns and a change in tenant composition means the longer-term rental growth trajectory will slow to around 2.2% to 2.5% annually. Scentre screens at broadly fairly valued, currently trading at a 6% discount to our unchanged AUD 3.85 fair…

Scentre Group’s Annual General Meeting was largely a nonevent but for the decision to undertake an on-market buyback, capped at AUD 700 million, or roughly 3.4% of current issued equity. As with peers, the buyback will only take place at a discount to the firm’s net tangible assets, or NTA, and illustrates management’s conviction in the December 2017 NTA of AUD 4.24 per security, up on the AUD 3.67 a year prior. Our unchanged AUD 3.85 fair value estimate for Scentre means we have a considerably…

Australia

Scentre Group develops and owns retail real estate properties. The Company is responsible for the development, design, management, leasing, and marketing of its portfolio of Westfield branded shopping centers. Scentre Group owns properties throughout Australia and New Zealand.

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