The company will acquire Rockdale Plaza for $142m on a 6.25% capitalisation rate. This is a high-quality metro asset, UBS observes, with strong operating metrics.
The main drawback is uncertainty regarding whether the acquisition represents a good purchase or a capitalisation rate expansion. The broker maintains a Neutral rating and target of $4.31.
UBS also takes comfort in the knowledge that the company’s five existing Big W stores ((WOW)) have a weighted average lease expiry of 18.5 years, which suggests that either the stores will not be closed or a substantial lease termination fee would be payable.
Woolworths intends to close around 30 Big W stores over the next three years.
Sector: Real Estate.
Target price is $4.31.Current Price is $4.61. Difference: ($0.30) – (brackets indicate current price is over target). If CQR meets the UBS target it will return approximately -7% (excluding dividends, fees and charges – negative figures indicate an expected loss).
