Westfield Corp reports: Is it still a buy after the restructure?

With strong retail performance and several new developments under construction, Westfield Corp (ASX:WFD) continues to show long-term potential.

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What: Two months after the successful restructure of Westfield Corp (ASX: WFD) and Scentre Group Ltd (ASX: SCG), both companies have released their half-yearly results to June 30 to the market.

While it's far too early to claim the restructure was a 'success' given that the two new entities commenced trading only a week before the financial year ended, Westfield Corp's half-yearly report provides an easy way to revisit its prospects going forward.

It's important to note that Westfield Corp divides its portfolio into 'Flagship' and 'Regional' assets, with Flagship assets the most important ones and the largest part of the portfolio in dollar terms. All dollar figures are in US dollars.

Highlights:

  • Specialty sales growth of 4.2% (Flagship stores +5.8%, Regional +2.1%)
  • 94.4% of portfolio leased (Flagship 95.9%, Regional 93.1%
  • Comparable net operating income +5.3% (Flagship +5.5%, Regional +5%)
  • Net Tangible Assets of $3.80 per share
  • Strong progress towards development projects:
    1. Over 70% of Westfield World Trade Centre Leased
    2. Commenced major redevelopments of The Village at Topanga (US) and Bradford (UK)
    3. Completed $160 million Garden State Plaza project
    4. Progress made towards future developments at Galleries Lafayette (Milan), increased ownership at Westfield Milan from 50% to 75%
    5. Sold 3 non-core UK assets for £597 million
  • Confirm second half forecast made in Securityholder Booklet, with funds from operations of 18.8 cents per security and dividends of 12.3 cents per security
  • Development pipeline of $9 billion (Westfield share $4.5 billion) with expected completion dates of 2015-2018, and targeted yields of 7-8%

So What?

As readers can see from the above figures, Westfield's Flagship assets perform significantly better than its regional ones and are worth 66% of the portfolio by value.

Wisely, Westfield intends to focus on its Flagship assets going forward and they are expected to make up an even larger portion of the portfolio and earnings over time.

With significant upcoming developments Westfield also looks likely to improve its earnings in future years, compensating investors for the premium to Net Tangible Assets they pay at present.

Now What?

The full year results released early next year will be the first true glimpse of the reformed Westfield, although the company has confirmed that its earnings guidance will meet that outlined pre-restructure back in June.

In the meantime Westfield's strong management and high-quality development pipeline should give investors the confidence of knowing that this is a blue-chip investment.

I personally own both Westfield and Scentre Group and have no intentions of selling any time soon, although they're not my first pick as income stocks.

That honour is held by The Motley Fool's Top Stock Pick for 2014-2015, a great small-cap share enjoying significantly faster growth than Westfield Group.

This company also boasts a strong track record of performance and is trading at a modest valuation considering its future prospects.

If you'd like to receive the full inside scoop on this great share – a company I also own – simply click on the link below and enter your email address and you'll be directed to our FREE report!

Motley Fool contributor Sean O'Neill owns shares in Westfield Corp and Scentre Group Ltd.

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