Vicinity Centres (VCX)
BUY

Retail strength

Sector: Real Estate

RESULTS

Need To Know

  • FY23 earnings beat (in-line ex-reversal of prior years leasing provisions and waivers). DPS in-line and gearing flat.
  • Retail sales and visitation increased over the period, suggesting resilience in consumer demand.
  • Guidance in-line with market expectations although outlook suggests positive operating momentum.

Result Overview: 

FFO 15.0cps (14.3cps ex-reversal of prior years leasing provisions and waivers) vs 14.6cps consensus.

AFFO 12.65cps vs 12.4cps consensus

DPS 12cps in-line with consensus

Gearing 25.6%, down 0.1%

FY24 FFO & AFFO Guidance in-line with consensus

Highlights

A good result. Headline ~2-3% Beat on FFO and AFFO but closer to in-line when removing the reversal of prior years leasing provisions and waivers. 

Total visitation was up ~12% driven by strength in CBD centres. Total retail sales were up ~8% on 2H22, supported by strength in luxury (up ~7.5%). Development pipeline remains strong with the Chatswood Chase lower ground dining and fresh food to complete in FY24. 

Balance sheet looks strong. Gearing 25.6% (down 0.1%), supported by the divestment of 50% interest in Broadmeadows Central. VCX is 90% hedged for FY24 which is a strong position to be in. The hedging does step down in FY25 but management have indicated they'll maintain active focus on mitigating interest risk. 

NTAps $2.30 (down 6 cents), implies a ~20% discount to current share price. Largely in-line with AREIT avg P/NTA discount.  

FY24 Outlook: FFO and AFFO guidance in-line with consensus.

Investment Thesis

We are pleased with the result from VCX. Operationally the group appears to be in a good position with retail sales and visitation both continuing to increase. No major concerns arise on the balance sheet and the pipeline continues to progress toward greater serviced based offerings that will increase visitations. The ~20% discount to NTA and the P/FFO multiple of 13x suggests that there is value at the current share price. 

We re-affirm our Buy rating. 

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Stock Overview

Share Price

Company Overview

VCX invests, manages, develops, leases, and manages funds for properties in Australia. It has two business segments: Property Investment and Strategic Partnerships.

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