Morningstar

Morningstar, Inc.

Equity Bottom-Up

Narrow-moat-rated Stockland’s 2019 investor day highlighted the property conglomerate’s good progress in executing its revised business strategy. The focus is to revitalise the core retail malls, exit noncore assets and expand the industrial and office segment. The group also reaffirmed its fiscal 2019 funds from operations, or FFO, per share growth guidance of 5%. Stockland now expects settlement of its residential land lots to fall short of prior guidance (above 6,000 units) due to production…

We reiterate our AUD 3.90 fair value estimate for property conglomerate Stockland following transfer of coverage to a new analyst. Our narrow moat, medium fair value uncertainty, and Standard stewardship ratings are retained. At AUD 4.45, shares screen as modestly overvalued. Key risks are tight lending standards, which may continue to depress the housing market and impact the volume and price of residential developments, and the erosion of the value of Stockland’s malls as sales are lost to…

Stockland’s operational update for third-quarter fiscal 2019 confirmed trading conditions remain extremely challenging for the firm’s two largest divisions of retail shopping malls and residential land sales and development. Against this backdrop, Stockland reaffirmed guidance for growth in funds from operations, or FFO, per security of around 5% for fiscal 2019. Our forecasts are just below guidance at 4% FFO growth
An expectation of continued tightness in bank lending criteria and…

<p>Stockland’s first-half fiscal 2019 earnings on a funds from operations, or FFO, basis of AUD 16.8 cents per security, or cps, were down on the 18.0 cps in the previous corresponding period, or pcp, and consistent with expectations. The decline was mostly due to a decline in residential settlements to 2,096 lots compared with 3,159 in the pcp. Stockland is guiding for over 6,000 settlements for fiscal 2019, underpinning stronger second-half earnings. We continue to forecast fiscal 2019 FFO growth…</p>

<p>Conditions in the Australian housing market have turned south far quicker than we were expecting. Pressure is coming from vastly tightened bank lending standards, a collapse in demand from offshore buyers and the delivery of a swathe of apartments, particularly in Brisbane. We generally don’t put much stock in the inherently volatile auction clearance rate, but with the capital city clearance rate systematically falling over 2018 and most recently reported at 54% (a six-year low) the clearance…</p>

Australia

Stockland is a diversified Australian property group. The Group develops and manages Retail centers, Residential Communities and Retirement Living assets with a focus on regional centers and outer metropolitan. Stockland also owns a portfolio of Office and Industrial assets.

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