Despite subdued conditions in the brick and mortar retail industry, shopping centre giant Westfield Group (WDC.AX) has largely outperformed the S&P/ASX 200 (XJO.AX) (^AXJO) over the past 12 months, gaining almost 31% compared to the index’s 12.9%.
In that time, the group boasted 1.1 billion annual customers and in excess of $40 billion in annual retail sales. Meanwhile, sales productivity in its Australian stores remained high, achieving $9,887 per square metre. Whilst it has had a strong year, it is the company’s future prospects and current share price that investors should be interested in. Based on the current value, is Westfield still an attractive buy?
Currently, Westfield has interests in 105 shopping centres spread over Australia, New Zealand, Brazil, the United States and United Kingdom, and also announced that it was interested in expanding into Italy back in 2011.
In 2012, the behemoth acquired $300 million worth of assets and commenced $1.4 billion in new projects, which will see new stores open and many existing stores expand. As an example, earlier this month, the group – along with its affiliate Westfield Retail Trust (WRT.AX) – announced its plans to expand its Garden City shopping centre in Brisbane (which is its best performing centre in Australia) by a further 40,000 feet. The development of the Westfield World Trade Centre in New York is also underway.
Furthermore, the company’s growing portfolio will be complemented by rent increases, including an average 2.5% increase in rents in Australia and New Zealand, and a 2.3% increase on average in the US.
Whilst the company embarked on a number of acquisitions and development assignments last year, it has also strategically divested $4.1 billion of underperforming interests in a bid to strengthen its portfolio.
Recently, the group divested its 50% stake of eight assets in Florida, with the intention of using the cash to purchase shopping centres elsewhere and to give back to its faithful investors.
Looking after shareholders
The rise of the Australian stock market over the past 12 months can be largely attributed to the investor’s search for high yielding stocks. As a member of the ASX 20, Westfield offers a yield of 4.3%, having distributed 49.5c per share in its last two dividend payouts.
In addition to the attractive yield, Westfield’s continuing share buyback program has greatly contributed to shareholder value, with more than $1 billion in repurchases.
As some of the larger brick and mortar retailers, such as JB Hi-Fi (JBH.AX), Myer Holdings (MYR.AX), David Jones (DJS.AX) and Harvey Norman (HVN.AX) revive their business approach and profitability, Westfield, and its stakeholders, should be set for more gains.
Whilst competitors GPT Group (GPT.AX) and Stockland (SGP.AX) have given investors similar returns over the past 12 months, Westfield’s strategic acquisitions and divestments are paving a way for a successful future. As the retail industry continues to recover and shareholder returns continue to climb, Westfield Group looks very attractive at today’s prices.
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