Should you buy Westfield Retail Trust?

This stock is trading significantly below its net tangible assets value, but does it present as a good buy?

a woman

Despite maintaining what could be considered Australia’s greatest quality mall portfolio, Westfield Retail Trust (ASX: WRT) is still sitting at a cheap price and analysts are reluctant to upgrade their recommendation to overweight.

The stock has only climbed marginally to $2.95 (from $2.92) per share despite having delivered a “solid” report last week. Although it reported a 3.6% fall in profits, its results were largely in line with forecasts and were pleasing considering the volatility facing Australia’s retail sector.

However, the current price tag on the trust represents a significant discount compared to the value of its net tangible assets – a discount that The Australian Financial Review reported to be 16%. At this price, it also offers a 6.8% dividend yield.

Despite the trust having been “cheap for a long time”, many analysts are left wondering what it will take to narrow the gap between its price and net tangible asset value – particularly considering the tough retailing conditions currently being experienced.

Regarding this, Morgan Stanley said “the tough – and seemingly deteriorating – retail fundamentals in Australia, and a lack of operational catalysts keeps us from changing our recommendation to overweight.”

On the other hand, the stock has also been labeled as a “compelling buy” by Deutsche Bank analyst Ian Randall, who has set a 12-month target of $3.50, which would equate to a return of 18.6% from today’s price. Whilst Randall also recognises the tough conditions facing the industry, he believes that the $3.50 target could be achieved through further share buybacks worth up to $200 million.

Foolish takeaway

Many property leaders have tipped that consumer confidence could rise following the federal election, whilst low interest rates should also play in favor of property groups. Westfield Group’s (ASX: WDC) co-CEO Steven Lowy stated that “I hope that event (the election result) will be a spark for a good lead into the Christmas period.”

Are you interested in our #1 dividend-paying stock? Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

More reading

Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »