Stockland (ASX:SGP) share price up 5% on solid half, guidance update, and asset sale

Here's what's sending the Stockland share price higher…

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Key points

  • Stockland was on form during the first half
  • Strong rent collections and property revaluations underpinned huge statutory profit growth
  • The company has also agreed to sell its Retirement Living business for $987 million

The Stockland Corporation Ltd (ASX: SGP) share price has been a positive performer on Wednesday.

In morning trade, the property company's shares are up 5% to $4.21 following the release of its half year results.

Stockland share price higher following strong half

  • Statutory profit up 150% over the prior corresponding period to $850 million
  • Funds from operations (FFO) down 9.3% to $350 million
  • FFO per share down 9.3% to 14.7 cents
  • Commercial Property rent collection of 97.5%
  • Distribution of 12 cents per share declared in December
  • FY 2022 FFO per share guidance range tightened

What happened during the first half?

Stockland had a positive first half to FY 2022 thanks to strong rent collections and commercial property revaluations. For the six months, the company reported a 150% increase in statutory profit to $850 million. This includes $543 million of net commercial property revaluation gains, which equates to a 5.5% uplift versus June 2021 book values.

Management advised that the latter reflects improved investor demand for high quality, essentials-based retail assets, strong transactional evidence for high quality logistics assets, and a broadly stable asset pricing environment for workplace assets.

In respect to its FFO, it came in 9.3% lower than the prior corresponding period at $350 million or 14.7 cents per share. Stockland is expecting its FFO to be more heavily skewed to the second half due partly to the timing of residential settlements and COVID-related tenant assistance.

In other news, the company has signed an agreement with EQT Infrastructure for the sale of its Retirement Living business for $987 million.

Management notes that this is broadly in line with its book value and delivers on Stockland's strategy to release capital for redeployment into higher growth opportunities and refocus the Communities business.

Management commentary

Stockland's Managing Director and Chief Executive Officer, Tarun Gupta, said: "We delivered a solid operational and financial result in 1H22, and have tightened our full year FFO per security guidance range. While maintaining our focus on operational excellence across our core business, we have also made significant progress toward implementing the strategy that we outlined in November of last year."

"The formation of two new capital partnerships, divestment of the Retirement Living business and further sale of non-core assets in our town centres portfolio over the half concentrates our focus on the core of our business. It enables us to redeploy capital toward opportunities in the residential, logistics and workplace sectors that we believe will generate superior returns on a sustainable basis," he added.

Outlook

Mr Gupta appears confident on the company's outlook following its solid first half.

He said: "The solid operational performance delivered in 1H22 provides us with good earnings visibility for the remainder of the financial year, notwithstanding the broader market uncertainty brought about by the ongoing COVID19 pandemic, elevated input cost inflation, and interest rate volatility. Accordingly, we are tightening our FFO per security guidance range."

"The strategic transactions that we have announced post-balance date provide us with an extremely strong balance sheet position and are also expected to be accretive to earnings in FY23."

Stockland's FY 2022 FFO per share is now expected to be in the range of 35.1 cents to 35.6 cents. This compares with previous guidance of 34.6 cents to 35.6 cents per share.

As for distributions, the company's distribution per share is expected to be within Stockland's targeted range of 75% to 85%.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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