Property Trusts & Infrastructure

Posted on | by Leon Hinde | Leave a Comment on Property Trusts & Infrastructure

The sell-off in property trusts and infrastructure names has been substantial, 15 to 20% since early September.

The REIT sector has underperformed as bond yields have rallied. The repricing has seen the dividend yield of REIT’s back above 5%.

Historically, the correlation between Australian yield names and US 10-year yields has been inverse; as US yields fall, Australian property trusts and infrastructure stocks rise.

US 10-year bond yields have risen by 79 basis points, or over 50%, since early October. We see this pace as unsustainable and expect the local yield names to trade higher as the US Treasury yields drift lower.

We continue to track WFD, GPT, SGP, SYD and TCL versus the US10 year bond yields.

wfd
Chart – Westfield

 

gpt
Chart – GPT
Chart - Stockland
Chart – Stockland
Chart - Sydney Airports
Chart – Sydney Airports
Chart - Transurban
Chart – Transurban
US 10YR Yield
US 10YR Yield

 

 

 

 

The Yield Basket We’ve Been Tracking

Posted on | by Leon Hinde | Leave a Comment on The Yield Basket We’ve Been Tracking

Over the last two months, bond markets have been repricing the probability of a US rate increase. During that time, we’ve watched the US10YR yields trade up from 1.3% to 1.9% . As a consequence, money managers have sold-off defensive yield names. This has been most evident in ASX 50 names within the infrastructure and property sectors.

We maintain a positive interest in these names as the current share prices now have many of the yields offering 100 basis points, (or 1%), more than they were trading at 2 months ago.

WFD and GMG are now trading back on 4% yield, whereas TCL, SYD, GPT and SCG are on average trading near 5% yield.

The December FOMC rate decision meeting will likely be the catalyst for a  bounce, however, we’re not expecting these names to recapture the recent highs. Therefore, we’ll look to sell the rally into the early part of 2017. The algorithm engine will track these names and I’ll be certain to alert you to the next lower structural high, but for the time being, you may want to position around the short term bounce which could offer up to a 10% rally.

Chart - GMG
Chart – GMG
gpt
Chart – GPT
scg
Chart – SCG
sgp
Chart – SGP

 

wfd
Chart – WFD

 

Chart - TCL
Chart – TCL
Chart - SYD
Chart – SYD

Lendlease Group – Higher Low Formation

Posted on | by Leon Hinde | 2 Comments on Lendlease Group – Higher Low Formation

Most property stocks have broken their long term uptrends and are displaying the early signs of a “rollover” type pattern. We’ll most likely see a bounce from the current oversold level, driven from an outcome on the December Fed rate hike. However, the probability of a bearish lower high in the next 3 to 6 months will mean the counter trend trade from the current lows will be short and explosive but the real opportunity to watch will be the short side trade in 2017.

The above picture applies to most property trusts and property development companies. The exception appears to be SGP and LLC. Out of the two names, my preference remains Lend lease.

FY17 should deliver EBITDA of $1.2b, EPS of $1.30 and DPS of $0.68 placing the stock on a forward yield of 4.9%

 

llc
LLC.ASX
sgp
SGP.ASX

Property Trust – Watch List Opportunities Update

Posted on | by Leon Hinde | Leave a Comment on Property Trust – Watch List Opportunities Update

On the 2nd of September, we made a blog post highlighting a group of stocks to place on your watch list. Among these were a number of property trusts and their indicated buy zones. Since then, as anticipated, we’ve seen bond yields move higher and selling in defensive yield names continue. We’re now at a point where a number of the names on our preferred watch list are in the “go zone”.

This post revisits the property trust names, however, there’re other sectors too that are now showing multiple buy-side signals from our algorithm engines.

Westfield (WFD.ASX)

wfd

GPT Group (GPT.ASX)

gpt

Scentre Group (SCG.ASX)

scg

Stockland Group (SGP.ASX)

sgp

Goodman Group (GMG.ASX)

gmg

Stockland FY16 Earnings Result

Posted on | by Leon Hinde | Leave a Comment on Stockland FY16 Earnings Result

SGP.ASX delivered 7%+ EPS growth and reported profit of $890m, which was in line with market expectations. FY17 should deliver growth of 5 – 7%, placing the stock on a forward yield of 5.2%, based on $0.25 of dividends.

We’re cautious of the valuation and future earnings certainty in SGP and therefore, would prefer to look for an entry point at lower prices. Our algorithm engines will alert us, when and if a suitable buy point occurs.