Westfield Group (WDC) News Today

Submitted by Jim Thesiger on 12 May, 2008 - 14:03

Westfield Group (WDC) are extremely well positioned and has a $19.79 share price target from Australian stock analyst Macquarie Research Equities

Westfield Group (WDC) Earnings robust in uncertain environment

Superior operator in an uncertain environment:

WDC are extremely well positioned for the current uncertain environment and as such, we stress at the outset that the business model is largely insulated from short term fluctuations in retail spend given long term lease (Avg WALE 8 years) and minimal lease expiry each year. We have reviewed WDC's group earnings in an attempt to reflect a deterioration of conditions in the operating environment (US NOI growth revised down 0.5% to 1.5% for FY08 and FY09).

Group earnings growth of 6.2% (revised down 0.5%):

Our forecasts reflect Group 5 year average earnings growth of 6.2% (07-12). On a constant currency basis FY08 EPS growth is 4.8% (Group inc hedging benefit) versus company guidance of similar FY07 (5.9%) operational segment earnings growth in FY08. Forecast DPS been reviewed on average downwards by 2.6% (FY08-11) as a result of US NOI growth, higher forecast debt costs, FX rates (UBSe based on fwd curve) and revised third party development assumptions.

NAV recently revised to $19.79:

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 DDM based valuation is $19.82 (beta increased from 0.54 to 0.65). Our price target is in line with our NAV of $19.79.

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