Westfield Group (WDC) Todays Update

Submitted by Jim Thesiger on 9 May, 2008 - 14:46

Westfield Group (WDC) has a price target of $19.79 from Australian stock analyst UBS.

Westfield Group (WDC) Domestically strong, US seasonal

Esteemed operator in an uncertain environment:

Further signs of a weakening global consumer emerged at today's Quarterly Review, most notably in the US where occupancy dropped to 93% from 93.4% Q108, with spec sales off 1.5% for the quarter. In contrast, Australian sales were strong, comp MAT up 5.9%. In the UK, Westfield London is now 88% leased/ agreed, from 75% in February. Despite volatile conditions, we like WDC for this very ability to actively manage assets across a diverse geographical footprint. Buy.

Spec occ costs on the rise, but development guidance largely unchanged:

With weak comparable US specialty sales growth for the 12 months rolling (up 0.7%) specialty occupancy costs have risen to 15.1% from 14.7% at Dec. The development yield range in the US dropped 10bps to 8.6-9.1%, ANZ increased 10bps to 8.4-8.9% while London was flat. Spend on current projects increased A$20m for Australia/NZ, while US spend increased US$15m.

NAV revised to $19.79, WACR 5.92%:

Our NAV has decreased from $21.04 to $19.79 (down 5.9%) with a WACR of 5.92%. Of the $19.79, 19% is attributed to the development pipeline and 3% is the property/development/funds management business (10x EBIT Multiple). The main drivers to this revised NAV are a mild softening in cap rates (WACR +0.16% to 5.92%) and valuation of the development pipeline reducing from $5.19 to $3.75.

Valuation

Our PT is inline with revised NAV of $19.79. The revision in metrics applied attempt to reflect a deterioration of conditions in the operating environment. Buy.