August 22:
I don't think distributions will get anywhere near my predictions made last year anytime soon (or ever).
I just don't see the long term upside here to t a 5% yield. Few things to beware of here:
- Leasing spreads are still negative.
- High contracted specialty rent increases are good, however only to the point the tenant still pays them. Do SCG still have that sort of market power?
- Big gap between FFO and distributions. This is mostly because of capex. SCG hasn't done a good breakdown of what items this capex relates to.
- Cost of debt is close to cap rate of portfolio (4.2% vs 4.87%) and likely to rise.
On the contrary, I do think that it's a good reflection on management that there was no cap raise during Covid. Maybe the market just thinks a discount rate of 6% is enough given the risk and maybe I'm pricing the risk incorrectly by plugging in 8-9%?
November 2021:
Positive quarterly update. I think negative leasing spreads will mean that distributions get back to pre covid levels by CY24.
I would be very surprised if distribution growth can be sustained above inflation in the long term. Retailers can no longer get the same bang for their buck in a shopping centre and this will make it very hard to increase rents.
Assuming a distribution of $0.18 for CY 22, a strong uplift in CY23 and then a steady growth in line with inflation.
August 2021:
Against a reported NAV (which capitalises management costs that SCG charges itself and capital partners....) of $4.27 you would be getting a distribution yield of 5.4%..... if trading conditions get back to where they were in 2019. On todays price you'd be getting 8.7%. HOWEVER Not once are leasing spreads mentioned in the whole presentation. VCX who I believe are comparable mentioned spreads of 12.7% in their presentation. This makes me think that even once no more restrictions are in place there would still about two years before this gets back to paying distributions at levels it was in pre covid times.
On top of this:
VCX has a lower cost of debt
VCX has a more diverse portfolio of retail assets
VCX has a higher current distribution yield
VCX has a higher distribution yield based on pre covid numbers
VCX has a higher portfolio cap rate
Not a fan of these guys but will upgrade my valuation to $2.50 based on SCG eventually getting back to pre covid levels and resultant 9% yield . NAV and NTA would not hold up on an open market.