Despite some early signs the home building and buying booms in Sydney and Melbourne are slowing, Stockland (SGP) says it remains on track to deliver its target of around 6000 sales of residential lots this financial year.
“This result provides a high level of confidence for our earnings outlook this financial year and confirms that the markets where we operate remain healthy, underpinned by 73% owner occupier demand,” CEO Mark Steinert said in a first quarter trading update issued yesterday.
Mr Steinert said the outlook for 2015-15 “remained positive” and he reconfirmed Stockland is still targeting a full year distribution of 24.5 cents, assuming no material changes in market conditions.
The group remains on track to increase underlying earnings per security by 6% – 7.5% and funds from operations by 8.5% to 10%, assuming no material change in market conditions, he said yesterday.
The encouraging growth will not lead to an increase in distribution, with the group still targeting the full year payout of 24.5 cents per security as it brings its payout back to a sustainable level.
"Our new projects continue to strengthen our returns with operating profit margins over 14 per cent," Mr Steinert said.
He said residential property markets, which gave Stockland 1557 net deposits for the quarter, were at different stages around the country. First quarter deposits combined with the deposits already on hand at the end of FY15 total 5,299. The majority of these will settle in FY16, with the balance in FY17, he said.
"In line with our previous commentary, we expect markets in Sydney and inner Melbourne will moderate with a more normalised level of growth," he said.
"Brisbane is showing improvement, Melbourne growth corridors remain sound and Perth has continued to slow as anticipated."
SGP 1Y – Stockland upbeat despite housing slowdown
Stockland’s shopping centre business, which is the single largest contributor to earnings, also continued to “perform well” with comparable specialty sales up 2.8% on the first quarter of 2015 and the comparable specialty moving annual turnover up 4.2%. The strongest performing retail categories were communication technology, food catering, retail services and homewares.
Mr Steinert said Stockland’s substantial retail development program was progressing very well with flagship project Wetherill Park in Sydney on track to open ahead of schedule before Christmas.
“Our development program overall is progressing on time and in line with feasibility,” Mr Steinert said. “Point Cook opened during the first quarter and is fully leased, H&M will open at Glasshouse in the Sydney CBD this month, ahead of schedule, and Harrisdale in WA is leasing well and on track to open in the second half of FY16.”
Stockland continued to grow its Logistics and Business Parks portfolio in the first quarter with the acquisition of an asset at Eastern Creek in Sydney on an 8% initial yield. Development of new buildings at the Oakleigh Distribution Centre in Victoria is now underway.
The performance of the Office portfolio is benefiting from Stockland’s strong weighting to Sydney. Around 65% of the portfolio is now located in the Sydney market, following the settlement of its 50% share in Waterfront Place and Eagle Street Pier in Brisbane during the quarter.
Retirement Living delivered a strong first quarter with both established and development reservations substantially higher than the same period last year, reflecting a successful sales campaign.The Retirement Living business is expected to have a stronger than usual profit skew to the second half, due to the timing and mix of sales.
Stockland securities rose half a per cent to $3.98.
