Investors in real estate outfit GPT Group (ASX: GPT) recently had a briefing from the company about how it's travelling, and the analysts at Macquarie certainly liked what they saw.
That's probably no surprise if you go back and have a look at their recent comments to the market.
In August, the company released its half-year results, and a stand-out was the occupancy levels in its retail portfolio, which were running at a hard-to-beat 99.7% at the end of the financial year.
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Retail running hot
The recent investor day briefing focused on the retail portfolio, which Macquarie analysts said accounted for 39% of GPT's $12.2 billion investment portfolio.
The Macquarie research note sent to clients this week said that GPT was outperforming its peers on the retail front, and the company's retail division had "improved fundamentals, stabilised valuations, capital inflow and expected income led returns''.
Some of the factors feeding into this were strong population growth projections, which were running at 7.3% over a five-year forward period, while growth in retail stock was only forecast to be a modest 0.9%.
The Macquarie note says:
The retail sector is supported by attractive fundamentals which GPT is well-placed to capitalise on. More broadly, execution of funds strategy offers upside potential to valuation in the medium-long term.
Growth story
GPT also had a strong retail development pipeline, with $1.5 billion in projects to be rolled out, including the Rouse Hill Town Centre in Sydney, which the analysts toured.
That project is expected to be completed in the fourth quarter of 2026 and adds 50 new tenancies in the area.
As Macquarie's analysts write, GPT is also targeting further growth.
GPT is targeting quality retail assets, in quality locations with a strong growth profile and good socioeconomics. Location preference is informed through catchment analysis, with leasing deals also benchmarked against the breadth of customer demand for a tenant in a specific area.
The strength of the retail sector was outlined in the Macquarie report, using the Highpoint Shopping Centre as an example, with that site fully leased out, "with 45 national tenants wanting to double in size and create flagship stores''.
Macquarie has an outperform rating on GPT shares and a valuation of $6.26 per share compared with the price at the time of publication of $5.44.
Factoring in dividends, they are expecting a total shareholder return over 12 months of 19.56%.
