One of the largest victims of this 2020 ASX stock market crash (official name has yet to be decided) has been shopping centre giant Scentre Group (ASX: SCG). This ASX REIT (real estate investment trust) has been absolutely smashed over the last month and is now trading at its lowest share price since it was spun-off from the old Westfield Group back in 2014.
That’s right. In January, Scentre shares were commanding a share price of $4. Today, you can pick some up for just $1.44 – a 64% turnaround in just two months. This new share price puts Scentre on a price-to-earnings ratio of just 6.36 and a trailing dividend yield of 13.58%.
Why Scentre shares are in the bargain bin
Well, as you might suspect, this cliff-drop in Scentre shares can be put almost entirely down to the coronavirus outbreak and tough restrictions on social gatherings that are now in place as a result. As a retail-focused REIT, Scentre has little in the way of ‘backup’ revenue streams if its centres are forced to close or only open for its supermarket clients.
We can expect the company to be bleeding money for at least the next two months, if not longer. What’s more, many Aussie retailers, spearheaded by Premier Investments Limited (ASX: PMV) chairman Solomon Lew, are now refusing to pay their rents to landlords like Scentre until their stores reopen.
The government might be providing some support for companies like Scentre in the coming weeks, but this isn’t clear as of yet. And who knows how long things will return to normal for the retail landscape once the coronavirus situation is contained.
Are Scentre shares a buy right now?
I think there can be a case for Scentre shares at these levels, but a high risk/high reward one. Scentre still owns vast swathes of very valuable land that its centres currently reside on, so there are still some physical assets that can underpin the value of this company (which will be very useful for Scentre in obtaining lines of credit).
I would expect things to return to a semi-normal state for Scentre sometime in the next year or so, but again, this is hard to pinpoint.
For a long-term, deep-value play, a crazy-brave investor might find something with the current share price of Scentre today, but for me, there is too much uncertainty with this one to make a comfortable investment at the current time.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool Australia has recommended Scentre 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.