Scentre Group (ASX: SCG) shares have had a strong last 12 months.
Its share price has risen 10% in that span.
Scentre Group (ASX: SCG) is the company behind a portfolio of 42 Westfield shopping malls — 37 in Australia and five in New Zealand.
In fact, on a macro level, ASX REITs like Scentre Group outperformed physical real estate/property in FY25.
Despite its dominance over the Australian and New Zealand market, broker Macquarie Group Ltd (ASX: MQG) has adjusted its price target for Scentre Group Shares.
Lets see what the broker had to say.
Cautious optimism
Macquarie's view on Scentre Group reflects a cautiously optimistic stance.
The company is expected to maintain strong operational performance, with high occupancy and positive leasing spreads indicating continued demand for its retail space.
This supports the narrative that well-located, premium retail centres are still attractive to tenants, even in a changing retail environment.
However, despite these strengths, Macquarie points out that Scentre Group's valuation is relatively high.
The stock is trading at about 16 times its expected earnings (FFO). This is above its long-term average of 15 times.
Retail sector tailwinds should benefit SCG, though we see better value elsewhere in the A-REIT sector with the group trading at ~16x FFO (15.0x LTA) and a 4.9% DPS yield (5.5% LTA).
Ultimately, the report suggests that Scentre Group is a stable and well-managed company. However, its current share price may already reflect much of its near-term upside. This may leave limited room for strong capital growth unless conditions improve significantly.
Reduced target price
Despite offering a relatively stable and defensive investment with solid fundamentals, from a valuation perspective, Macquarie believes other A-REITs may offer more compelling value at this time.
This is reflected in the updated price target of $3.18.
It is a slight downgrade from the previous price target of $3.24.
Based on the current share price of $3.70, it indicates a downside of approximately 14.05%.
