It is rare to see a large cap REIT trading at a large discount to valuation, but when we do our numbers on newly formed Scentre Group (SCG) that is exactly...

Tim Hannon

Newgate Capital Partners

It is rare to see a large cap REIT trading at a large discount to valuation, but when we do our numbers on newly formed Scentre Group (SCG) that is exactly what we see. SCG is the combination of the portfolio of Westfield Retail Trust and the portfolio and Australian operations of Westfield Group. To highlight the mispricing we compare SCG to Colonial First State Retail, which is trading on a 6.8% yield. We argue that SCG should trade on a firmer yield given its higher quality portfolio and operating platform. If we do this we arrive at an SCG valuation of $3.60+, well above the last trade of $3.19. As selling abates from investors that received SCG as part of their Westfield Group holding and don't want it, we see SCG trading firmer over coming weeks. Disclosure: Freehold Funds own Scentre Group.


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Tim Hannon
Principal
Newgate Capital Partners

Tim has 22 years’ experience in the investment and securities markets. Tim was a partner of Goldman Sachs JBWere and during his 15-year tenure at the firm had senior experience across all areas of equities investing. Tim was Head of Australian...

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