SCA Property Group: Result 2018

Shopping Centres Australasia Property Group (SCP) has revealed a decent result for the 2018 financial year, with 2% sales growth from its supermarkets (mainly Woolworths stores). SCP owns 77 neighbourhood retail shopping centres situated across Australia and receives both a base rent and a percentage of a supermarket's sales – so it benefitted from Woolworths reducing prices to increase sales.

The Trust's portfolio continues to perform well with 98% occupancy and rental growth of 3%. When renewing leases over the past year SCP received an impressive average rental uplift of 6% on the previous lease. Unlike better known retail landlords such as Scentre or Stockland, SCP's tenants are not particularly exposed to the impact of online sales or Amazon's entry into the Australian market place. Consumer staples and medical and personal services are not easily delivered online.

Over the past year SCP has been working to improve the quality of its property portfolio, and generating new income from managing supermarkets owned by external investors. Four new shopping centres have been added in NSW and Queensland, while four non-core properties worth $58 million have been sold into a fund that SCP will manage.  This reduces the trust's gearing, while adding a new stream of income. 

Management expects to increase the distribution by 3% to 14.3 cents per security in 2019, which is roughly what we'd expect over the long term and puts the stock on a yield of about 5.8%. We're increasing our Buy price from $1.90 to $2.10 and our Sell price from $2.90 to $3.00. HOLD.