Scentre Group


March 19, 2024 FAT-AUS-1028

SCG-2 Snapshot

Scentre Group
Latest Closing Price: AUD3.28
Scentre Group Limited manages, develops and has an ownership interest in Westfield branded shopping centers in Australia and New Zealand. The Company has a portfolio of approximately 38 Westfield shopping centers in all metropolitan cities and some regional centers. The Australian portfolio has around 11,135 retail outlets in 3.4 million square meters of retail space. The Company has an interest in nine centers with over 1,400 retail outlets in excess of 379,000 square meters of retail space. Its Westfield Chatswood is located in the affluent Northern Suburbs of Sydney, approximately 11 kilometers from the CBD. Westfield North Lakes is located 25 kilometers north of Brisbane’s CBD. Its Westfield Kotara is located six kilometers south-west of Newcastle’s CBD.
Market Capitalisation: AUD17.04b
Price to Earnings: 97.6 15.0
Dividend Yield (%): 5.1 5.3
Price to Book: 0.95 0.91
Return on Equity (%): 1.0 6.5
EV/EBITDA: 19.6 16.2

Worth Holding

Shopping mall owner Scentre Group (ASX.SCG) shares advanced and continue to trend higher after releasing robust underlying results and upbeat distribution guidance of at least 17.2 cents per stapled security in 2024, above consensus.

Turning to the charts, Scentre Group has confirmed a topside breakout from a multiyear primary downtrend which is encouraging. An advance above $3.20 at the top of the range, would confirm an inflection and raise scope for additional upside to the next resistance level at $3.80.

With that out of the way, we turn our attention to the group’s FY23 trading update:

Trading Update – FY23 Results Review

Scentre Group’s Westfield shopping centres reported record retail sales of $28.4 billion in 2023, marking a $1.7 billion increase compared to the previous year. An interesting result despite a slowdown in consumer spending, perhaps this reflects resilience in the group’s tenant categories.

The surge in sales, up by 6.4%, likely influenced by both organic growth and inflationary effects on goods sold, contributed to a 5.2% rise in funds from operations (FFO) to $1.09 billion for the fiscal year ending December. So far, full year distribution amounted to 16.6¢ per security, up 5.4%.

Increased foot traffic, up by 6.7% across Scentre’s centres, and high demand for retail space drove occupancy rates to 99.2%, up from 98.9% the previous year.  We also note a worthy improvement in leasing spreads, which went from -3.6% 12 months ago to +3.1%. This indicates a notable positive shift in the rental rates achieved on new leases compared to expiring leases within its portfolio of shopping centres and malls.

Throughout the year, Scentre completed 3,273 leasing deals, adding 307 new brands to its portfolio, comprising 42 Westfield retail centres in Australia and New Zealand.

Expansion projects, like the completion of the final stage of Westfield Knox in Melbourne and ongoing developments at Westfield Sydney, aim to enhance retail offerings and customer experiences.

Strategic partnerships with brands like Disney, Live Nation, and Netball Australia, along with initiatives like the Westfield membership program, contributed to increased customer visitation, reaching 512 million for the year, up 6.7% from 2022.

Scentre Group anticipates continued growth, with a focus on creating exceptional retail destinations and experiences, supported by a $4 billion pipeline of retail development opportunities.

The group targets a FFO range of 21.75¢ to 22.25¢ per security for 2024, reflecting a 3 to 5.4% increase over the previous year, and expects distributions of at least 17.2 cents per security for 2024.


That aside, management brought attention to the fact that there was almost $1.1 billion in write-downs, representing a -1.9% valuation decline. This significant figure indicates a downward adjustment in the value of the company’s assets, primarily its portfolio of shopping centres and malls.

The write-downs were primarily driven by an average 42 basis point softening of capitalization rates. Capitalization rates, also known as cap rates, are used to determine the value of income-producing properties based on their expected income. A softening of these rates were due to a decrease in property values, which necessitated the write-downs.

The substantial write-downs contributed to a decline in Scentre Group’s statutory net profit, which dropped by -41.8% year-on-year to $174.9 million. Though this metric is not as important for SCG as it functions more like a REIT in a portfolio providing income but this development is still worth tracking.

After all, write-downs reflect broader trends in the commercial real estate market, where shifts in economic conditions, investor sentiment, and property market dynamics can lead to fluctuations in asset values. In this case, the softening of capitalization rates may be attributed to factors such as changing market expectations, interest rate movements, or specific challenges within the retail sector.


Scentre Group’s record-breaking retail sales in 2023 underscore the resilience and adaptability of its shopping centre portfolio, marked by increased foot traffic, high occupancy rates, and strategic leasing initiatives. Despite the challenges posed by the pandemic and inflationary pressures, the company’s focus on creating compelling retail experiences and forging partnerships with leading brands has paid off, driving growth in both sales and funds from operations. Expansion projects and ongoing developments further demonstrate Scentre’s commitment to enhancing its retail offerings and meeting evolving consumer preferences.

Looking ahead, the group’s robust pipeline of retail development opportunities positions it for continued growth, supported by a targeted increase in funds from operations and distributions for 2024.

In the meantime, despite the positive results, we maintain our HOLD rating on Scentre Group (ASX.SCG) for now. We believe that it is crucial for the broader monetary policy to change before we adjust our view on the group.

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