What: The newly formed owner of the Australian and New Zealand assets of the Westfield shopping centre empire, Scentre Group Ltd (ASX: SCG), posted its first set of half-year results today. Comparable property net operating income was up 2.3% and comparable store sales up 3.3% for the six months to June 30 2014.
The forecast distribution is for 10.2 cents per security for the six months to December 31 2014. Assuming that payout is at least maintained in the next half-year period the group would trade on a forward yield of 5.84% based on a share price of $3.49.
Now what: The group has operating interests in 47 shopping centres across Australia and New Zealand and relies on growing rental income from tenants who are reliant on growth themselves through higher sales revenues based partly on growing foot traffic.
The majority of specialty leases for tenants are negotiated as incrementally increased on the consumer price inflation (CPI) index plus 2%. This gives Scentre defensive revenue streams loved by income investors and the ability to keep its growth ahead of inflation.
The other growth option for the business is via new shopping centre developments. Although it could be argued that Scentre Group shareholders have drawn the short straw here compared to Westfield Corp (ASX: WFD) shareholders. This because of the saturated nature of the Australian shopping centre market, compared to the opportunities in the rest of the world available to Westfield Corp.
What of the outlook: Scentre remains a defensive income play that offers steady growth potential for long-term focused investors. As always the key is to buy at the right price and some patience is likely to give investors a reasonable entry point below today's price of $3.49.
