Stockland: Result 2012

Property developer and manager Stockland has announced its full year results, with underlying net profit (the preferred measure for a property business) falling 7% to $676m, or 29.3 cents per security. The board declared a final unfranked distribution of 12 cents, bringing the full year total to 24 cents. This places Stockland on a 7.4% distribution yield.

The performance of the residential development division (see Table 1) highlighted the tough conditions facing property developers, with dwelling approvals falling 12% over the past year. With credit growth the lowest its been in forty years, the 2013 result could be worse again.

Elsewhere, Stockland continues to sell its office and industrial properties, and invest in new retail projects and other capital management initiatives, such as the recent security buy back. Stockland's retail properties are practically full and enjoying like for like rental growth of 3.8%. The retirement division is also starting to show some progress with net profit increasing 125% to $36m, albeit from a low base.

Strategically, though, there’s now some uncertainty following the recent announcement that long standing managing director Matthew Quinn will leave the company in February 2013. A new chief may take the group in a new direction; putting into question the longevity of the ‘3Rs’—retail, residential and retirement—strategy.

Net tangible assets (NTA) per security increased marginally over the period to $3.68, due mainly to the security buyback program. The 10% discount to NTA is not enough to warrant an upgrade, but Stockland remains one of the better managed and capitalised property groups, with debt to tangible assets well below 30%. The security price has increased 7% since Stockland: Building a profitable future from 23 Apr 2012 (Hold – $3.03) and remains a HOLD.