The Shopping Centres Australasia Property Group Re Ltd (ASX: SCP) share price has risen by 7.31% today (at the time of writing), following a business update on its outlook amid the coronavirus crisis.
Withdrawal of FY 2020 earnings guidance
Shopping Centres announced that it has withdrawn its FY 2020 earnings and distribution guidance, in light of recent government announcements and uncertainty about the impact that the pandemic will have on its shopping centres and Australia’s business sector during the next few months.
Revenue heavily weighted towards non-discretionary items
On a positive note, the group believes that it is better positioned than most shopping centres to ride out the coronavirus crisis, as 84 of its 85 shopping centres all have either a Woolworths Group Ltd (ASX: WOW) or a Coles Group Ltd (ASX: COL) store located within them. Both food chains are witnessing much higher foot traffic and sales than normal during the past few weeks, as shoppers stock up on essential food and other supplies.
Shopping Centres noted that its anchor tenants make up 48% of gross rental income. While its specialty tenants account for the remaining 52%, the majority of the total revenue generated in these shops is for non-discretionary items.
It also pointed out many of these specialty tenants include including pharmacies and medical centres, as well as liquor and fresh food retailers, all of which continue to experience strong sales.
As Shopping Centres revealed in its half year results for FY 2020, Woolworths accounts for 28% and Coles for 11%, of all anchor tenants by gross rent, while fresh food, catering and liquor stores account for 32% of all specialty tenant gross revenue.
Shopping Centres did note, however, that a number of its tenants – including gyms, cinemas, massage and beauty parlours – have been forced to close over the past few days following restrictions to non-essential store openings. However, the group pointed out that the total proportion of revenue coming from these establishments comes to only $1.0 million of gross rental income, of a total of around $300 million.
Therefore, the overall impact on its bottom line is expected to be relatively small, and the impact from any rental loss can be partially offset by increases in rent from its anchor tenants such as Coles and Woolworths, as well as other cost savings.
Solid balance sheet
Shopping Centres pointed out that it has a strong balance sheet with $176 million of cash available and its debt position is also strong, with its next debt obligation not due to April 2021. The group anticipates that it will be able to remain cash flow positive for the next 13 months.
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Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Shopping Centres Australasia Property Group. 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.