Food-based strategy central to Charter Hall success

CHARTER HALL Retail REIT has benefited from its food-anchored shopping centre strategy with a forecast rise in end of year earnings boosted by asset sales and acquisitions.

By InvestSMART · 18 Feb 2012

By InvestSMART ·
18 Feb 2012

Comments

CHARTER HALL Retail REIT has benefited from its food-anchored shopping centre strategy with a forecast rise in end of year earnings boosted by asset sales and acquisitions.

For the six months to December 31, the group reported a 5.7 per cent drop in net profit due to financing costs to $41.7 million, in line with market expectations.

Acting chief executive, Scott Dundas, said the half year distribution was 13?, up 1? on the previous corresponding period. Earnings per security was 13.92?. He said barring unforeseen events, forecast full year earnings were expected to be in the range of 28.75? to 29.25? per unit.

Speaking after the results presentation, Mr Dundas, who is in the acting role since the former chief executive Steven Sewell took up the same position at the new-look Centro Properties this year, said being a food-based group was the more profitable in the current cautious retail environment.

"Having a food-based tenancy has been shown as the best performer and this is reflected in the Australian Bureau of Statistic, where food spending has outgrown discretionary spending," Mr Dundas said.

"Our strategy is to exit, at the right price, our overseas assets and focus on being an Australian-based business. But we have been recycling assets out of the US and New Zealand, only when we can use that cash to buy an Australian asset."

He said the group was still considering a buy back proposal.

Bank of America Merrill Lynch real estate analysts said Charter Hall's operating metrics were stronger than those reported recently by Stockland and Westfield, reflecting the more "convenience" focused portfolio (less Borders/Colorado/fashion, lower occupancy costs for tenants).

Go to Google News, then click "Follow" button to add us.

Share this article and show your support

Frequently Asked Questions about this Article…

What is Charter Hall Retail REIT's food-anchored shopping centre strategy and why does it matter for investors?

Charter Hall focuses on food-anchored shopping centres — centres with a strong grocery and food tenancy mix. According to acting CEO Scott Dundas and Australian Bureau of Statistics data cited in the article, food spending has outgrown discretionary spending, making food-based centres more resilient and profitable in the current cautious retail environment.

How did Charter Hall perform in the six months to December 31?

For the six months to December 31 the group reported a 5.7% drop in net profit to $41.7 million, largely due to financing costs. The acting CEO said the half-year distribution was 13 (up 1 on the previous corresponding period) and earnings per security were 13.92, in line with market expectations.

What full-year earnings guidance did Charter Hall give?

Charter Hall said that, barring unforeseen events, forecast full-year earnings were expected to be in the range of 28.75 to 29.25 per unit.

How have asset sales and acquisitions affected Charter Hall's earnings outlook?

The article states that a forecast rise in end-of-year earnings was boosted by asset sales and acquisitions. Charter Hall has been recycling assets — selling overseas holdings when it can use the proceeds to buy Australian assets — which has supported its earnings outlook.

Is Charter Hall shifting its portfolio away from overseas assets?

Yes. The company’s stated strategy is to exit overseas assets at the right price and focus on being an Australian-based business. Management said they have been recycling assets out of the US and New Zealand when the cash can be used to buy Australian assets.

Is Charter Hall considering a buy-back of securities?

The article says the group was still considering a buy-back proposal, but no final decision was reported.

How do analysts compare Charter Hall with other retail property groups like Stockland and Westfield?

Bank of America Merrill Lynch real estate analysts said Charter Hall’s operating metrics were stronger than recent reports from Stockland and Westfield. They attribute the outperformance to Charter Hall’s more convenience-focused portfolio, which has less fashion exposure and lower occupancy costs for tenants.

Who is leading Charter Hall and were there recent leadership changes mentioned?

Scott Dundas is the acting chief executive. He took on the acting role after former chief executive Steven Sewell left to take up the same position at the reorganised Centro Properties.