Westfield Group (WDC) is the world’s largest listed retail property group was listed as a share to buy in our traders report on Tuesday April 16th. The group has a global portfolio, comprising 105 shopping centres across five countries.
It also manages all aspects of shopping centre development, from design and construction through to management and marketing.
WDC reported an 18.3% rise in FY12 net profit to $1.7 billion. Funds from operations – which strip out asset revaluations – climbed 6% to $1.5 billion.
Net property income rose 7%, with the UK contributing a large part of the growth as the London Olympics led to an increase in shopping centre traffic.
There was positive 2H momentum in the US, with net operating income growth exceeding previous guidance as specialty sales rose due to a record number of shops opened.
Another highlight was the high occupancy rates. Global occupancy was 97.8%, up 30 basis points on-year with most of the growth coming from the US portfolio.
WDC also extended its share buyback for another 12 months, a move likely to provide a good degree of support for its share price.
Shedding non-core assets
In the latest example of the group optimizing its asset structure, WDC sold its 49.9% stake in six Westfield shopping centres in Florida, USA, to O’Connor Capital Partners.
The sale is expected to bring in net proceeds of US$700 million and will result in a joint venture between the two firms, with Westfield retaining its role as property, leasing, and development manager.
By shedding non-core assets, WDC is freeing up capital to help fund its $12 billion development pipeline and engage in capital return initiatives such as the expansion of its buyback program.
Last week WDC commenced a plan to redevelop Westfield Garden City at Mt Gravatt, Queensland.
The $400 million project will be jointly funded by WDC and Westfield Retail Trust (WDC). The redevelopment will include a full line Myer department store, a new Target store and over 100 new specialty retailers.
The Mt Gravatt project is expected to yield 6.75% – 7.25%, in line with the yield generated by WDC’s other development projects in the US and Australia.
WDC commenced $1.4 billion in new projects during 2012, and forecast another $1.25 – $1.5 billion in new projects during 2013. The overall development pipeline now stands at $12 billion.
In our view, the group’s selling of non-core assets and investment in high yielding projects will increase the return from its assets and ultimately translate into further share price appreciation.