Stockland: Result 2018

The housing market is cooling in Sydney and Melbourne but, so far at least, it doesn't seem to have mattered much to Stockland. For the year to June, it sold 6,438 home lots, pushing profit in its residential development division up by 24%. Management expects the fun to continue for at least another year, targeting 6,000 lots, including 400 townhouses, in 2019.

If housing markets continue to soften, Stockland might struggle to maintain these rates in 2020 and beyond. However, selling moderately priced home and land packages to predominately first home buyers is less risky for Stockland than it is for, say, Mirvac to sell apartments to investors, who are less likely to complete on a purchase off the plan if the price has dropped since they put down their initial deposit.

Elsewhere in the portfolio of this diversified property trust, shopping centres delivered rental growth of 2.2%, although this was reduced by the costs of changing its mix of tenants. Across Stockland's portfolio of shopping centres, the Trust reported sales growth of 1.6%, which was similar to that reported earlier in the month by Vicinity Centres, though below that of Scentre and GPT. As Scentre and GPT's portfolios are more heavily weighted towards higher-end shopping centres, this suggests the lower and mid-tier shopping centres have been affected more by online sales and rising energy costs biting into shoppers' wallets.

Management expects profits to grow by 5–7% in 2019, based on selling around 6,000 homes and townhouses. Distributions are expected to grow to 27.6 cents per unit which equates to a distribution yield of 6.6%. Given Stockland's development activities, though, this yield is subject to greater risks than trusts like Scentre Group and GPT, which primarily collect rent. HOLD.