UBS assesses Scentre Group’s hybrid notes issuance will solidify its existing credit ratings and increase the buffer to debt covenants. The earnings forecast has been downgraded by circa -10% due to the hybrid issue.
The broker highlights from an ordinary security holder’s perspective, the gearing is high at 40% and leads the broker to maintain its dividend payout ratio of 70%.
Due to increasing holdovers and a shortening weighted average lease expiry (WALE) in a period when the leasing power has shifted to retailers, the broker considers income uncertainty to be high.
Reflecting reduced financial risk, UBS reaffirms its Neutral rating with the target price rising to $2.40 from $2.25
Sector: Real Estate.
Target price is $2.40.Current Price is $2.22. Difference: $0.18 – (brackets indicate current price is over target). If SCG meets the UBS target it will return approximately 7% (excluding dividends, fees and charges – negative figures indicate an expected loss).