The company has acquired a 50% share of a shopping centre in Booragoon, Perth for $570m, an acquisition which makes strategic sense to UBS given the quality of the catchment and development potential.
As income is depressed, because of re-development, the passing yield is 4.7%. Based on the broker’s estimates, after adjusting for management income, the underlying cap rate is closer to 5.2%.
Management expects its buyback to continue, which fully executed will add 2% to the last stated gearing ratio of 30.6%.
Given the acquisition will be funded by debt, other trade-offs are required, in the broker’s view, such as the deferral of the Westfield Stirling project at nearby Innaloo. Neutral and $3.90 target retained.
Sector: Real Estate.
Target price is $3.90.Current Price is $3.86. Difference: $0.04 – (brackets indicate current price is over target). If SCG meets the UBS target it will return approximately 1% (excluding dividends, fees and charges – negative figures indicate an expected loss).
