德银-澳大利亚-地产行业-写字楼是我们的首选目标-20171127-37页_1mb

Australasia Australia Property Industry Commercial Property Update - 27 November 2017

Core Content Summary

This document provides an update on the Australian property market, with a focus on commercial property sectors and key REITs. The analysis includes rental growth forecasts, company performance, valuation metrics, and investment recommendations.

Main Points

Office and Industrial Markets

• Rental Growth Forecast Increased: The rental growth for both Office and Industrial sectors in 2018 is expected to increase compared to previous forecasts.
  • Sydney CBD: Gross rents are forecasted to grow by 8-10% (previously 6%).
  • Melbourne CBD: Gross rents are forecasted to grow by 7-9% (previously 3%), with incentives falling to 20-25%.
• Leasing Activity: Strong leasing activity is observed in the Logistics market due to the demand for same-day delivery, with tenants willing to pay premiums for proximity to high-density areas.
• South Sydney: Rents are forecasted to grow by 6-8% in 2018 (previously 4%).
• Western Sydney: Rents are expected to grow by 3-5% in 2018 (previously 2%).

Retail Sector

• Subdued Growth: Retail rental growth is expected to be subdued due to weak Specialty MAT sales and store closures.
  • Retail Shopping Centres: Rental growth is reduced to 0-2% (previously 1-3%).
• Amazon Impact: While Amazon's entry into Australia poses a challenge to Bricks and Mortar retailers, the "retail apocalypse" has been overhyped. Retail landlords continue to report high occupancies and improved NOI growth since 2013.

Earnings Changes

• Mirvac and Dexus: These companies experienced the most significant earnings changes, although the impact was less than 1%, due to exposure to updated Office and Industrial assumptions.

Investment Picks

• Stockland Group (SGP.AX): Recommended as the preferred diversified REIT.
  • Reasons: Exposure to single-family dwellings, strong dividend yield (5.8% vs 5.0% for peers), and currently trading at a 14% premium to NTA, below its historical average of 17%.
• Scentre Group (SCG.AX): Also recommended with a Buy rating.
• Goodman Group (GMG.AX): Recommended with a Hold rating.
• Mirvac Group (MGR.AX): Recommended with a Hold rating.

Valuation Metrics

• Valuations Updated: The price targets are set at 50% of the DCF and 50% of the SOTP.
• Risks: Cap rates tightening or softening, tenant defaults (see page 27).

Key Company Information

Stockland Group (SGP.AX)

• Price (27 Nov 17): AUD 4.62
• Target Price: AUD 4.95
• 52 Week Range: AUD 4.11 - 4.97
• Market Cap: AUD 11,171m / USD 8,515m
• Financial Summary (2016-2020E):
  • DB EPS: 0.31, 0.33, 0.35, 0.35, 0.36
  • Reported EPS: 0.31, 0.33, 0.35, 0.35, 0.36
  • DPS: 0.25, 0.25, 0.27, 0.27, 0.28
  • BVPS: 3.87, 4.15, 4.38, 4.53, 4.67
• Valuation Metrics (2016-2020E):
  • Price/Sales: 4.0, 4.2, 4.1, 4.1, 4.0
  • P/E (DB): 12.5, 13.7, 13.0, 13.1, 12.7
  • P/E (Reported): 12.5, 13.8, 13.0, 13.1, 12.7
  • P/BV: 1.2, 1.1, 1.1, 1.0, 1.0
  • FCF Yield: 15.4%, 13.9%, 8.1%, 6.9%, 10.5%
  • Dividend Yield: 6.3%, 5.6%, 5.8%, 5.8%, 6.0%
  • EV/Sales: 5.5, 5.5, 5.3, 5.2, 5.2
  • EV/EBITDA: 15.6, 16.5, 15.5, 15.5, 15.0
  • EV/EBIT: 15.6, 16.5, 15.5, 15.5, 15.0

Scentre Group (SCG.AX)

• Price (27 Nov 17): AUD 4.17
• Target Price: AUD 4.25
• 52 Week Range: AUD 3.80 - 4.46
• Market Cap: AUD 22,149m / USD 16,882m
• Financial Summary (2015-2019E):
  • DB EPS: 0.23, 0.23, 0.24, 0.25, 0.27
  • Reported EPS: 0.23, 0.23, 0.24, 0.25, 0.27
  • DPS: 0.21, 0.21, 0.22, 0.22, 0.23
  • BVPS: 3.37, 3.72, 3.98, 4.20, 4.05
• Valuation Metrics (2015-2019E):
  • Price/Sales: 6.0, 8.3, 7.6, 7.3, 7.0
  • P/E (DB): 15.4, 18.4, 17.2, 16.4, 15.5
  • P/E (Reported): 15.4, 18.4, 17.2, 16.4, 15.5
  • P/BV: 1.1, 1.2, 1.0, 1.0, 1.0
  • FCF Yield: 16.6%, 5.5%, 7.5%, 7.0%, 6.6%
  • Dividend Yield: 6.0%, 5.0%, 5.2%, 5.3%, 5.5%
  • EV/Sales: 9.7, 12.5, 11.7, 11.4, 11.0
  • EV/EBITDA: 15.9, 18.4, 17.8, 17.2, 16.6
  • EV/EBIT: 15.9, 18.4, 17.8, 17.2, 16.6

Goodman Group (GMG.AX)

• Price (27 Nov 17): AUD 8.69
• Target Price: AUD 8.31
• 52 Week Range: AUD 6.38 - 8.73
• Market Cap: AUD 15,628m / USD 11,912m
• Financial Summary (2016-2020E):
  • DB EPS: 0.40, 0.43, 0.46, 0.49, 0.51
  • Reported EPS: 0.40, 0.43, 0.46, 0.49, 0.51
  • DPS: 0.24, 0.26, 0.28, 0.30, 0.31
  • BVPS: 4.53, 4.62, 4.89, 5.15, 5.41
• Valuation Metrics (2016-2020E):
  • Price/Sales: 6.4, 8.1, 8.4, 8.1, 8.1
  • P/E (DB): 15.3, 17.1, 18.8, 17.6, 17.1
  • P/E (Reported): 15.3, 17.1, 18.8, 17.6, 17.1
  • P/BV: 1.5, 1.7, 1.8, 1.7, 1.6
  • FCF Yield: 9.1%, 8.5%, 10.7%, 11.2%, 7.9%
  • Dividend Yield: 3.9%, 3.5%, 3.2%, 3.4%, 3.5%
  • EV/Sales: 7.6, 8.9, 8.6, 8.1, 7.7
  • EV/EBITDA: 14.7, 16.1, 16.7, 15.5, 14.6
  • EV/EBIT: 14.8, 16.3, 16.8, 15.6, 14.7

Mirvac Group (MGR.AX)

• Price (27 Nov 17): AUD 2.44
• Target Price: AUD 2.34
• 52 Week Range: AUD 2.00 - 2.54
• Market Cap: AUD 9,034m / USD 6,886m
• Financial Summary (2016-2020E):
  • DB EPS: 0.13, 0.14, 0.15, 0.15, 0.17
  • Reported EPS: 0.13, 0.14, 0.15, 0.15, 0.17
  • DPS: 0.10, 0.10, 0.11, 0.10, 0.12
  • BVPS: 1.94, 2.15, 2.26, 2.23, 2.11
• Valuation Metrics (2016-2020E):
  • Price/Sales: 3.8, 3.8, 3.8, 3.9, 3.5
  • P/E (DB): 13.8, 15.0, 15.8, 16.7, 14.2
  • P/E (Reported): 13.8, 15.0, 15.8, 16.7, 14.2
  • P/BV: 1.0, 1.0, 1.1, 1.1, 1.2
  • FCF Yield: 7.6%, 6.4%, 5.6%, 4.2%, 4.9%
  • Dividend Yield: 5.5%, 4.8%, 4.5%, 4.3%, 5.0%
  • EV/Sales: 5.4, 5.3, 5.1, 5.5, 4.7
  • EV/EBITDA: 14.2, 14.7, 15.5, 16.7, 14.2
  • EV/EBIT: 14.8, 14.7, 15.5, 16.7, 14.2

Key Company Metrics and DuPont Analysis

Stockland Group

• Sales Growth: nm, 13.3%, 4.4%, 0.1%, 0.3%
• DB EPS Growth: na, 7.4%, 6.2%, -0.5%, 2.8%
• Payout Ratio: 78.4%, 76.8%, 75.0%, 76.0%, 76.0%
• EBITDA Margin: 35.0%, 33.4%, 34.0%, 33.7%, 34.4%
• ROE: 8.0%, 8.1%, 8.1%, 7.8%, 7.8%
• Net Debt/Equity: 38.8%, 33.2%, 31.6%, 29.1%, 26.6%
• Net Interest Cover: 4.5, 4.8, 5.0, 4.5, 4.7
• DuPont Analysis:
  • ROA (post tax): 4.4%, 4.6%, 4.8%, 4.6%, 4.7%
  • ROE: 8.0%, 8.1%, 8.3%, 7.9%, 7.8%

Scentre Group

• Sales Growth: nm, -10.5%, 7.2%, 3.6%, 4.1%
• DB EPS Growth: na, 3.2%, 4.3%, 4.9%, 5.8%
• Payout Ratio: 92.6%, 91.4%, 89.4%, 87.0%, 85.0%
• EBITDA Margin: 61.1%, 67.8%, 65.7%, 66.1%, 66.6%
• ROE: 6.7%, 6.3%, 6.1%, 6.1%, 6.7%
• Net Debt/Equity: 61.4%, 58.1%, 57.4%, 56.0%, 59.4%
• Net Interest Cover: 3.5, 3.7, 3.7, 0.0, 0.0
• DuPont Analysis:
  • ROA (post tax): 3.8%, 3.7%, 3.7%, 3.9%, 3.9%
  • ROE: 6.9%, 6.5%, 6.2%, 6.2%, 6.6%

Goodman Group

• Sales Growth: nm, -3.7%, 12.6%, 3.2%, 0.9%
• DB EPS Growth: na, 7.6%, 6.9%, 6.8%, 3.3%
• Payout Ratio: 59.8%, 60.2%, 60.0%, 60.0%, 60.0%
• EBITDA Margin: 51.7%, 54.9%, 51.7%, 52.1%, 53.2%
• ROE: 8.9%, 9.4%, 9.4%, 9.6%, 9.4%
• Net Debt/Equity: 18.2%, 9.1%, 1.3%, 0.0%, 0.0%
• Net Interest Cover: 5.5, 9.5, 9.1, 0.0, 0.0
• DuPont Analysis:
  • ROA (post tax): 5.8%, 6.1%, 6.4%, 6.8%, 6.9%
  • ROE: 8.6%, 9.0%, 9.3%, 9.4%, 9.2%

Mirvac Group

• Sales Growth: nm, 18.2%, 14.6%, -4.2%, 14.2%
• DB EPS Growth: na, 10.8%, 7.2%, -5.7%, 17.5%
• Payout Ratio: 92.6%, 91.4%, 89.4%, 87.0%, 85.0%
• EBITDA Margin: 51.7%, 54.9%, 51.7%, 52.1%, 53.2%
• ROE: 8.9%, 9.4%, 9.4%, 9.6%, 9.4%
• Net Debt/Equity: 18.2%, 9.1%, 1.3%, 0.0%, 0.0%
• Net Interest Cover: 5.5, 9.5, 9.1, 0.0, 0.0
• DuPont Analysis:
  • ROA (post tax): 5.8%, 6.1%, 6.4%, 6.8%, 6.9%
  • ROE: 8.6%, 9.0%, 9.3%, 9.4%, 9.2%

Conclusion

The Australian property market shows varying trends across sectors. Office and Industrial sectors are expected to experience strong rental growth due to limited supply and increasing employment. The Retail sector faces challenges due to declining sales and store closures, with subdued growth. Stockland Group is highlighted as the preferred REIT due to its diversified portfolio and strong financials. The analysis includes updated valuations and investment recommendations based on current market conditions and company performance.