Shopping Centres Australasia share price slips on FY22 results

The REIT reported positive figures to the market today but is wary of rising interest rates.

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Key points

  • The Shopping Centres Australasia share price is down on Tuesday despite the company posting a positive earnings report for FY22
  • Fears surround the REIT's adjusted funds from operations moving forward due to floating interest rates
  • Shopping Centres Australasia reports its sales are above pre-COVID levels

The Shopping Centres Australasia Property Group (ASX: SCP) share price is in the red on Tuesday amid the company delivering a mixed earnings report for FY22.

Shares of the managed real estate investment trust (REIT) currently swap hands for $2.83 each, down 4.07% on yesterday's closing price. The REIT sector is also in the red, with the S&P/ASX 200 A-REIT Index (ASX: XPJ) down 0.72%

Although Shopping Centres Australasia reported growth in its top and bottom lines in FY22, its outlook for the 2023 financial year is pessimistic.

Let's investigate some of the highlights of the company's results.

What did Shopping Centres Australasia report?

  • Revenue up 19% on FY21 to $350.3 million
  • Net profit after tax (NPAT) up 5.2% on FY21 to $487.1 million
  • Investment property portfolio value up 10.31% on FY21 to $4.46 billion
  • Adjusted funds from operations (AFFO) up 24.8% on FY21 to $169.5 million,
  • Net tangible assets up 11.5% on FY21 to $2.81 per unit

The company's strong top and bottom line performance was helped by higher sales figures in its shopping centres after bouncing back from COVID-19 restrictions.

Shopping Centres Australia reported it has mostly recovered from the impact of the virus.

Total sales were said to be 10% higher than pre-COVID levels in December 2019. Sales growth momentum also shot 4.5% higher in Q4 FY22.

What else happened in FY22?

The company also reported an uptick in cash collection from its creditors during the COVID-19 period. In fact, it reported a 100% cash collection rate. It cited lockdowns in 1H FY22 as a headwind that had stopped it collecting from creditors during that period.

Shopping Centres Australia also acquired seven convenience centres in FY22 in Queensland, New South Wales, and Victoria. The total value of the acquisitions was $341.9 million.

What did management say?

Shopping Centres Australasia CEO Anthony Mellowes said:

Over the last twelve months, our convenience-based centres have remained resilient. Our tenant sales are now 10% above pre-COVID levels. Leasing spreads and cash collection rates were impacted by lockdowns in New South Wales and Victoria during the first half of the year, but improved in the second half. We have made solid progress on our sustainability program, including completing our LED rollout, and the installation of solar panels on our WA assets.

What's next?

The company expects its adjusted funds from operations (AFFO) per unit, a key performance measure of REITs, to contract 1.96% from 15.30 down to 15, primarily due to floating interest rates.

However, the company has a medium to long-term vision of increasing its AFFO to 2-4% per annum. The strongest growth drivers for the company are expected to be property development and acquisitions in its shopping centre segment.

More than $300 million worth of estimated capital investment has been proposed to develop its centres over the next five years. Some activities include expansion, improvement, and rebuilding, as well as improving sustainability through clean energy solutions such as solar.

Shopping Centres Australasia share price snapshot

The Shopping Centres Australasia share price is currently down 5% year to date but up 6% in the last 12 months.

It's outperformed the S&P/ASX 200 Index (ASX: XJO) over the past year with the benchmark index losing 6% over the same period.

At the current share price, the company's market capitalisation is around $3.15 billion. 

Motley Fool contributor Matthew Farley 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 Scott Phillips.

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