Westfield Update

Westfield has a Neutral 1 broker call and a $21.18 share price target from Australian Stocks analyst UBS. Earnings Upgrades post Raising: $10bn of development starts over the next 3 years: WDC have 19 projects under construction (estimated total cost A$7.6b, Westfield's share $5.4bn with the majority of the difference being 50% ownership of Westfield London). WDC expect to commence in excess of $10b (WDC's share $9bn) of new projects over the next 3 years. EPS increased by 0.5% to 3.4% in FY07 to FY11: The analysts have increased their development pipeline by $5bn, the major project being Stratford (c$4bn, c5.5%). They have also increased Westfield’s non-owned dev pipeline by $0.9bn. The EPS impact of the increased development starts & $3bn capital raising is 0.5%-3.4% from FY07-FY11e. NOI growth currently 2.5%: If they increased their forecast NOI growth across the portfolio from their base 2.5%pa to 3.0%pa or 3.5%pa it would provide on average 1.6%pa or 3.2%pa accretion. This would increase our valuation by 40c and 84c respectively. Valuation increased by 2.7%: Their revised EPS forecasts increased our Fair Value and Price Target to $20.29 and $21.18 respectively. Westfield are more focussed on maximising returns on capex of 12-15% IRR (unlevered), rather than acquiring mature assets on 8% IRR in the direct market. To that end, they expect Westfield's to continue to sell more mature assets to keep gearing below 45% as it works through its current pipeline. NAV $21.25 (exc. any premium for the Westfield brand). Their price target is based on a DCF model.

Meanwhile, another stocks analyst, Citi Investment Research have a NAV based price target of $23 and a Buy rating. WDC is raising $3bn in equity at $19.50, an 18% discount to the analysts' price target. The raising is on the back of a ramp up in the development pipeline, though the analyst expects acquisitions are on the agenda. They maintain their positive view; the substantial pipeline will drive earnings growth and value creation. Bringing forward projects such as UTC and Valley Fair will bring forward earnings accretion. Accretion will occur upon various project completions between FY09-FY11. Westfield stated they will start projects of $9b over the next 3 years. The analyst had approximately $7bn in their numbers already. A drop in gearing, potential to JV assets and issue property linked notes gives Westfield significant opportunity to pursue acquisitions. The UK will be a likely focus, assisted by a possible wholesale fund. Though no details around the timing or assets were given. It is likely stabilized assets such as any part of Royal Victoria Place, Castle Court or, once completed, White City could be included in the fund. The other UK assets are flagged for further development works. Management stated gearing will drift back to 40-45%. With the likelihood of revaluation upside and potential to JV stabilised assets, there is ample ability to fund more acquisitions while keeping gearing lower.

Westfield Limited is listed on the Australian Stock Exchange (ASX) under stock code WDC. You can view their investor website here. WDC was listed on the ASX on 5 July, 2004. The company is involved in shopping centre investment, property management, leasing and marketing, property development, design and construction, funds/asset management. Find out the meaning of the recommendations in this primer. The Westfield Group is the largest retail property group in the world by equity market capitalisation and the eighth largest entity listed on the Australian Stock Exchange. Operating on a global platform, the Westfield Group is an internally managed, vertically integrated shopping centre group, undertaking ownership, development, design, construction, funds and asset management, property management, leasing and marketing employing in excess of 4,400 staff worldwide. The Westfield Group has interests in an investment portfolio of 121 shopping centres valued in excess of A$60.7 billion (US$47.9 billion) located in Australia, the United States, New Zealand and the United Kingdom. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade WDC. Check your charts and good luck with your share trading!