The value of Scentre Group (ASX: SCG) has plummeted lower this year with the Scentre share price falling 50%.
The Aussie real estate investment trust (REIT) has been aggressively sold down by investors spooked by the coronavirus pandemic.
Scentre owns and operates Westfield shopping centres across Australia and New Zealand. That means tightening restrictions have hurt foot traffic and therefore earnings in 2020.
Scentre is set to announce its half-year result on 25 August. Here's where I think the Scentre share price will end up in August.
Why the Scentre share price has been smashed
Even experienced REIT investors are struggling to value retail real estate right now. That's been reflected in the heavy Scentre share price losses this year.
With foot traffic plummeting and many bricks and mortar stores forced to close, the operating environment looks difficult.
Aside from supermarkets like Coles Group Ltd (ASX: COL), in-store sales for many retailers have been tough.
It's also hard to see if and when large-scale shopping centres will be back in vogue. Restrictions look set to stay for the near future which could hurt tenants and rent collection.
However, it's not all bad news. One thing I do like about Scentre is the high-quality real estate assets in its portfolio.
That means despite some short-term headwinds, I still think the long-term outlook could be good for shareholders.
What can we expect in Scentre's half-year earnings?
I don't have high expectations for Scentre's half-year earnings. However, I think the 50% fall in the Scentre share price shows that most investors are in the same boat.
I would expect the government's JobKeeper stimulus to help in the short term. JobKeeper has helped businesses keep the lights on and meet their obligations this year.
A new Mandatory Code of Conduct for commercial leases, however, could be a drag on earnings. That new mandate has provided relief to tenants but won't help Scentre's bottom line in 1H20.
Where will the Scentre share price close in August?
This is a tough one. I think much of the expected earnings downturn is already reflected in the Scentre share price.
I think we could see Scentre shares climb higher in August. Stronger than expected earnings could provide a boost despite the medium-term outlook remaining tough.
