Coronavirus: Why the Scentre (ASX:SCG) share price can benefit from eased restrictions

The Scentre Group (ASX: SCG) share price has been smashed in 2020 but I think the Aussie REIT can surge higher if COVID-19 restrictions ease.

| More on:
man jumping for joy carrying shopping bags

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Scentre Group (ASX: SCG) shares have been smashed in 2020. The Scentre share price is down 42.6% in 2020 despite surging 5.2% higher in yesterday's trade.

However, I think the Aussie real estate investment trust (REIT) is one of the best-placed shares for an easing of coronavirus restrictions. Here are a few reasons to consider watching the Scentre share price in 2020.

The Scentre share price is cheap

Shares in the Westfield owner and operator look cheap right now. Of course, ASX shares don't fall for no reason and investors are expecting lower future earnings.

COVID-19 restrictions have hit shopping centres hard in 2020 with tenants and landlords battling to maintain profitability. That's seen the Scentre share price slump lower but I think that creates a buying opportunity.

It's hard to price in coronavirus impacts

One of the hardest aspects of stock picking is working out what is already priced into a company's valuation. For instance, the ASX banks have been hammered and investors are worried about further economic deterioration. However, that deterioration is largely expected by the market and ASX bank valuations have been falling accordingly.

COVID-19 is something of a unique beast. No one knows when or how current restrictions will be eased or even re-introduced. That makes pricing in expected loss of earnings for retail REITs very hard right now.

Market dislocation is a good thing for value-minded investors. I think the Scentre share price could rocket higher if we see restrictions ease quicker than expected.

Scentre is backed by prime real estate assets

On top of the above, Scentre is fundamentally backed by a huge portfolio of real estate. And that's not just any real estate, some of these are huge blocks of prime real estate in major cities.

That means even if earnings remain depressed in the short to medium term, I think a strong asset backing is worth considering at a certain price.

Foolish takeaway

The Scentre share price has been under pressure in 2020 but I still think there's a lot to like at a 42.6% discount.

Motley Fool contributor Ken Hall 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.

More on REITs

An Australian farmer wearing a beaten-up akubra hat and work shirt leans on a fence with livestock in the background and a blue sky above.
REITs

Why is the Rural Funds share dropping today?

This may be the reason investors are exiting Rural Funds.

Read more »

Man holding out Australian dollar notes, symbolising dividends.
REITs

Want the latest quarterly dividend from Rural Funds? You'd better hurry

Here's what you need to do to secure the latest dividend from this income stock.

Read more »

An industrial warehouse manager sits at a desk in a warehouse looking at his computer while the Centuria Industrial share price rises
REITs

Why bond yields are bruising ASX property shares on Monday

It's a bad day to own property shares this Monday...

Read more »

Rising real estate share price.
REITs

How are ASX REITs smashing 52-week highs despite today's market meltdown?

If you own ASX REITs, you're probably feeling pretty chuffed today.

Read more »

An Australian farming woman of the land wears an akubra hat and work shirt smiles broadly as she looks out over turned soil paddocks with a mountain range far off in the distance and blue sky above.
Dividend Investing

Want passive income? This high-yielding ASX dividend stock pays cash every quarter

The list of ASX dividend stocks making quarterly income payouts isn’t overly large. Here's why I like this one.

Read more »

Increasing blue arrow with wooden property houses representing a rising share price.
Broker Notes

3 ASX 200 REITs receiving broker upgrades today

These three ASX 200 REITs have earned a thumbs up from brokers today.

Read more »

a man sits on a ridge high above a large city full of high rise buildings as though he is thinking, contemplating the vista below.
REITs

Here are 4 ASX 200 REITs results catching the eye on Wednesday

A mixed set of results have been announced by these property companies.

Read more »

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
REITs

2 ASX 200 shares making big moves on strong earnings

These two REITs are soaring, despite swinging to big losses.

Read more »