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Is there any value in Newcrest Mining Limited, Scentre Group Ltd, and Sydney Airport Limited?

Credit: Szaaman

Times are getting interest-ing for Australians everywhere, with the Reserve Bank of Australia (RBA) yesterday deciding to cut interest rates to a new record low of 1.75%. Going with the territory was a jump in a number of high-yielding stocks, which feature prominently in this week’s collection of 52-week highs.

Here’s what you need to know:

Newcrest Mining Limited (ASX:NCM) – last traded at $19.95, up 38% in the past 12 months

Newcrest’s rise really began back in February following its half-year report, although shares are up almost 100% from the low of $10.55 hit in December. The recent strong interest in Newcrest comes despite an average report that revealed falling profits as a result of lower gold and copper prices. Much of the rise since then can be attributed to Newcrest’s lower costs and improving balance sheet, US interest rates remaining on hold, as well as a 25% lift in the value of gold from lows of US$1,050 in December.

It is uncertain where the price of gold will head from here, but Newcrest looks pretty fully valued at today’s prices.

Scentre Group Ltd (ASX:SCG) – last traded at $4.77, up 28% in the past 12 months

I sold Scentre Group not too long ago as I suspected the company would be vulnerable to an economic slowdown and/or higher interest rates would hurt the business. Yesterday’s rate cut confirms the downward rate cycle has yet to play out , which means I may have been too premature in my selling. Lower rates also intensify demands for dividends – which has caused Scentre shares to shoot higher again. Scentre is a great business, and one that I think is relatively resilient to a variety of economic conditions. However, it now trades at a 50% premium to its Net Tangible Asset (NTA) backing, which is too expensive to make it a buy right now.

I would call Scentre either a Hold or a Sell, depending on your appetite for income and view of the risks affecting the sector.

Sydney Airport Limited (ASX:SYD) – last traded at $7, up 31% in the past 12 months

Like Scentre Group above, Sydney Airport shares shot higher yesterday as investors chase higher yields following the RBA’s rate cut. Historically, Sydney Airport has been able to grow its share price and dividends much faster than the market’s average, as a result of growing tourism tailwinds and a largely fixed cost base. With visitor numbers set to double by 2030 and significant capacity upgrades available with comparatively limited capital investment, Sydney Airport is well placed to continue growing earnings for the next decade. One thing investors will want to watch is its debt, which has an average maturity date of 2023 (although less than 15% comes due in any given year) and could be impacted by higher global interest rates.

I would call Sydney Airport a Hold at today’s prices.

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Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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