Amid the housing slowdown, the Stockland Corporation Ltd (ASX: SGP) share price has increased by almost 10% in the last three weeks.
Stockland, one of the largest real estate groups in Australia, is in the process of divesting assets to release capital for reinvestment and reshaping its commercial property portfolio.
Recent transactions that took place in the last six months include the sale of Stockland Bathurst Shopping Centre and Stockland South in Caloundra for $113 million and sale of The Grove residential development for $202.5 million.
According to the Managing Director and CEO, Mark Steinert, the proceeds of the sale will strengthen Stockland's balance sheet, enhance workplace and logistics development, and provide funds for securities buyback to allow the company to capitalise on counter-cyclical residential opportunities.
Is management hinting the Stockland share price is undervalued?
Since announcing the intention to buy back shares, Stockland has been actively executing its $350 million shares buyback initiative over the last few months.
Share buybacks can benefit shareholders who hold on to the shares because it increases their percentage of ownership and share prices.
A big fan of share buybacks is none other than Warren Buffett. He believes that the best use of cash is to buy back shares when they are below the business's value.
Based on the current Stockland share price, it is trading at 0.9 times to book value. Most investors believe that a price to book ratio below one indicates that the shares may be undervalued.
Furthermore, Stockland seems fairly valued with a forward price to earnings at 10.4 times as compared to its 5-year average of 14.6 times.
Stockland has been a consistent dividend paying machine for the last 15 years. It currently has a forward dividend yield of around 7% with the next payment of $0.135 due on 28 February 2019.
I think owning Stockland shares now is a great opportunity for investors who want to put their foot in real estate but find it too capital intensive to own physical properties.
Coupled with Stockland's current PB at 0.9 and its share buyback initiative, I believe it will bode well for investors who plan to own Stockland shares for the long term.