Why the Charter Hall share price is up nearly 30% in 2019

The Charter Hall Group (ASX: CHC) share price closed at $9.31 on Friday afternoon, having reached heights of $9.46 after opening the year at $7.35. The share price of Australia’s leading property manager has risen nearly 30% in 2019, following a positive update from the company.

Smashing expectations

In late February, Charter Hall Group issued the market with a revised and upgraded guidance on its earnings for the FY19. A stellar first half saw the company’s after-tax operating earnings grow nearly 16% in comparison to previous guidance of 8%-10%.  Revenue for the first half of 2019 increased 19.5% to $155 million, in addition to growth of 11% in net profit of $113 million and a 13% increase in operating earnings of $108 million. Funds under management also grew by a staggering 22%, which sees the company overlooking a diversified portfolio worth over $28 billion. The rationale for this growth is pinned on the company’s acquisition of Folkstone funds management platform and an increase in collection of fund management and performance fees.

Blasting the past

For a while, real estate companies listed on the stock exchange offered safe, predictable returns as their prices mirrored those of government bond yields. The advent of more aggressive growth strategies and taking advantage of a flexible balance sheet has seen companies like Charter Hall Group achieve returns of nearly 60% per annum.

Charter Hall Group operates a diverse portfolio that includes; industrial sites, shopping centres, childcare centres and commercial office space. Despite the clouds of concern about falling prices hanging over the property market, the company’s business model has seen Charter Hall buck the trend.  The company’s earnings are based around collecting property management and base fees which is supplemented by returns from developmental profits. This business model allows Charter Hall Group to outperform the earnings growth and return on equity in comparison to traditional property managers.

Foolish takeaway

In my opinion, Charter Hall Group is one of the most underrated growth stocks listed on the ASX. As investors look to take profits, the future should present some good buying opportunities for shares in Charter Hall Group. If you really suffer from fear of missing out, global logistics company the Goodman Group (ASX: GMG) is another player in the sector which could be worth taking a look at.

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Motley Fool contributor Nikhil Gangaram has no position in any of the 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 Scott Phillips.

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