Stockland tips steady rise
Investors have embraced Stockland's strategic review with analysts now factoring in growth for 2014-15 and beyond based on a revival in the retail, housing and retirement segments.
Although not officially keeping the famed "three R strategy" of his predecessor, Stockland's new chief executive, Mark Steinert, believes the three categories will return to improved trading conditions, albeit in various stages.
In his highly anticipated strategic review released on Monday, Mr Steinert said for 2013 the group's earnings would be at the lower end of the 20-25 per cent range of decline that he warned of at the half-year results in February.
There was an additional impairment of $49 million covering issues in the residential sector, including the resolution of an outstanding court case.
Mr Steinert said that additional impairment reflected further analysis and in some instances divestment negotiations.
A material amount of this impairment concerns a provision covering a court appeal, in which Stockland had assumed the worst outcome
But he said with an anticipated turnaround in the residential market and a revival in "prod-ucts" offered in the retirement sector, the earnings for 2014 and 2015 should be higher. Mr Steinert said Stockland was a group in transition and would remain a broadly diversified property group "leveraging its core asset and development strengths in shopping centres, residential and retirement living, while retaining and, over time, increasing exposure to industrial property as a core capability".
Analysts said retail shopping centres was where Stockland saw the bulk of its growth, while industrial exposure was expected to gradually increase as well.
Credit analysts from National Australia Bank said the review that Stockland outlined looked more like an "evolution than revolution". They said the group needed to stick with its move to maintain its A-rating to keep credit-ratings agencies from issuing any downgrades until the full-year results were announced.
"The company stuck with its previous 2013 earnings per security and distribution guidance of 24¢, as well as restating comments that 2013 will be a tough year for it. There was also another impairment charge coming out of the residential business," the credit analysts said. "In essence they have levers to keep their A-credit rating and ... they effectively told us they are prepared to pull them if needed."
Morgan Stanley analysts said Stockland's management was clearly trying to avoid setting expectations too high. However, they have retained their recommendation on Stockland as a "high-conviction overweight".