Morningstar | Stockland’s Multi-Year Growth Engine Runs Low on Fuel. FVE Cut to AUD 4.00
We like Stockland's high-quality investment portfolio and welcome the revised group strategy to expand the industrial and retail businesses but gradually exit the office segment. The reinvestment in the retail assets should strengthen the moat, as it will be harder for competitors to attract customers from revitalised shopping centres. Nonetheless, we expect relatively subdued medium-term growth in retail sales and rents, given growing online sales, a slowing Australian economy, and higher household saving rates. The residential development division gets the most attention from the investment community, despite contributing just one third of earnings. Earnings can be volatile because of fluctuating prices and volume. A sharp slowdown in residential sales and price declines during 2018 and into 2019 point to the strong residential market having run its course.Stockland is engaged in owning, managing and developing shopping centres, logistics centres and business parks, office assets, residential communities, and retirement living villages. As of June 30 2016, Co.'s Commercial Property portfolio included 42 retail centres, 27 properties of logistics and business parks portfolio, and nine assets of office portfolio; and it had approximately 76,800 lots in its residentialportfolio. Also, Co. is a retirement living operator in Australia, with over 9,600 established units across five states and the Australian Capital Territory, which includes a development pipeline of over 3,100 units.
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