Shareholders of retail giant Westfield Group (ASX: WDC) are in for a positive year according to equity broker, CLSA, which anticipates that 2014 will be a "rebound" year for the company after a rather disappointing 2013.
While the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) rose over 15% last year, driven by strong performances from a number of Australia's blue chips, both the group and its affiliate Westfield Retail Trust (ASX: WRT) declined in value by 4% each. However, CLSA believes that shares should rise from their current level in 2014, and will be driven by asset sales and a more lively retail sector.
One of the major factors holding shares back is the company's pending proposal to split its business in two. Under the plan, Westfield's and Westfield Retail Trust's Australian and New Zealand assets would be combined to form a new corporation to be known as Scentre Group, while its international assets would also form a new company known as Westfield Corporation.
The proposal has not been well-received by investors or analysts due to its lack of detail and transparency, with many questioning the costs behind the deal and the merger ratios between the two groups. CLSA noted that the Lowy family may have to sweeten the deal for Westfield Retail Trust shareholders to support the move.
Regardless, the broker has upgraded Westfield Retail Trust to a "buy" with a price target of $3.52, which is 15% higher than today's price of $3.06. Should the Lowy family improve the deal for Westfield Retail Trust, that price target could certainly climb. Meanwhile, it has set a price target of $11.70 for Westfield Group, which also equates to a 15% rise from today's $10.20 figure.
Foolish takeaway
While CLSA believes the group's exposure to prime locations and key cities such as London and New York will "prove to be attractive to investors" (which should see shares driven upwards), stronger retail figures should be the driving force behind Westfield Retail Trust securities.
