CSLA analyst John Kim has labeled the unchanged earnings guidance of property developer Westfield Group (ASX: WDC) as “uninspiring”, following its 35.7% fall in net profits for its first half.
According to The Australian Financial Review, Kim believes that strong sales growth in the US was likely to be offset for the remainder of the year by slow growth in the company’s Australian and New Zealand divisions, but that earnings would likely pick up again for FY2014.
The company’s shares remained relatively flat following the release of the report with most results falling in line with forecasts. However, the number of rental deals struck by the company for the period were slightly lower than expected as rents on new leases fell by 6.1%. On the other hand, the company maintained strong occupancy rates, despite many retailers struggling in the current market conditions.
Kim believes that the company’s various redevelopment projects and increase in property values will likely be the predominant driver of growth in the future.
Whilst the company, and its counterpart Westfield Retail Trust (ASX: WRT), are undertaking numerous redevelopment projects locally – for instance, redevelopments to its Miranda shopping centre in Sydney are underway whilst its Garden City shopping centre in Brisbane is expected to be complete by late 2014 – it is also completing work abroad.
One of its most promising stores is the World Trade Center development in New York, which is well underway, whilst work on stores in Milan, London, and Century City in Los Angeles are yet to begin.
These developments are part of the group’s strategy to expand further globally and to strengthen its asset portfolio. By investing in its more profitable properties and divesting from its weaker performing assets, it can also improve upon its shareholder returns.
Despite the volatility in the property and retail sectors, Westfield still offers good value to potential investors as it aims to pursue growth and earnings opportunities. On top of this, it also offers a dividend yield of 4.6%.
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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.