Scentre of retailers’ attention worth splurge

Formerly known as Westfield, the nation’s biggest shopping centre owner is a handy guide to broader retail conditions.

Virtus Health

Formerly and more lovingly known as Westfield, the nation’s biggest shopping centre owner Scentre Group (SCG, $5.06) is a handy guide to broader retail conditions across its 11,600 shopfronts.

Judging from yesterday’s half-year debrief, the tenants are faring better than the whingeing about overbearing landlords might suggest.

Overall, Scentre was able to demand rent increases of 2.6 per cent, on its tenants’ overall sales growth of only 1.3 per cent.

CEO Peter Allen argues that Scentre’s centres are the go-to locations for entrants such as H&M, which on Saturday throws opens its door at Scentre’s Bondi mall.

Scentre reports a 99.5 per cent occupancy rate across its 40 centres in Australia and New Zealand, despite the demise of Dick Smith and its 40 stores.

Overall, Scentre reported a 6.6 per cent increase in interim reported profit to $1.15 billion. Management’s preferred measure, free funds from operations, edged up 2 per cent to $617 million.

Scentre is also surfing the uptick in NSW, where 39 per cent of its lettable space is located.

Victorian growth was down, with a revamped rival Eastland complex stealing share from Scentre’s Doncaster and Knox.

Specialty store growth is outstripping the supermarket tenants, which grew sales by a mere 0.2 per cent.

But it depends on the category: jewellery recorded dazzling 8.9 per cent growth but cinemas have declined a less than blockbusting 5.9 per cent.

“The big issue is the size of the store,’’ Allen says, noting that newcomers prefer bigger stores across a smaller footprint. Buy.

Shriro Holdings (SHM) $1.14
GWA (GWA) $2.73

As with dunny maker GWA, kitchen brand custodian Shriro distances its fortunes from the new apartment market, which is more heated than one of the company’s Blanco stoves.

Shriro chief Mike Westrup says as the cranes eventually disappear from the landscape, the renovation market should provide a second wave of activity.

Shriro recorded a $3m loss but a 29 per cent surge in normalised earnings to $3.1m. The kitchen appliances arm doubled EBITDA to $1.7m, even though revenue declined almost 14 per cent.

Westrup attributes the top-line decline to Harvey Norman and The Good Guys no longer stocking the Blanco range.

“Even though sales were down, profits were up,’’ Westrup says. “We weren’t making any money out of it.’’

Shriro owns or distributes the Blanco, Omega, Robinhood and Everdure names, with extension brands bearing the Heston Blumenthal and Neil Perry monikers.

Meanwhile, shares in GWA continue to win favour after Monday’s well-received results, which follow years of bog-ugly numbers. GWA’s fittings such as Dorf taps and Caroma khazis are normally added at the final stage of construction, which means the order books should be flush with work for months to come.

GWA is a hold, Shriro is a buy for the 8 per cent yield.

Virtus Health (VRT) $8.20

When they’re feeling flush, financially speaking, consumers don’t just rush to the shopping mall or redo their kitchens.

They also redouble their procreation efforts.

At the time of its 2011 listing, the IVF provider buttressed itself against cut-price entrants by creating The Fertility Centre, a chain of budget clinics in poorer areas.

IVF isn’t cheap at any price, with the bulk billers charging $700 a cycle while the bells and whistles version might leave patients $4500 out of pocket. The average aspirant mum needs three cycles and there’s no guarantee of success.

Virtus’s full-year results suggest that, if anything, patients have upsized with the premium NSW facilities leading the way.

Victorian revenues were flat, which CEO Sue Channon partly attributes to new low-cost rivals including City Fertility and Primary Health.

In a positive sign for population-depleted mining communities, Queensland regional clinics returned to growth for the first time in three years. Channon attributes this not so much to any mining recovery but to women deciding they can’t defer treatment for any longer. Long term buy.

Acrux (ACR) 41c

It’s high-level pharma drama when a company is relieved of the rights to its main product, which in Acrux’s case is the roll-on testosterone treatment Axiron.

By ruling the patent invalid, the District Court in Indiana has opened the way for generic competition for Axiron, the leading treatment with $US30m of sales in the June quarter.

Acrux and its licensee Eli Lilly expect a “material decline” in Axiron sales, which was enough to hit the stock by 40 per cent.

As if that’s disastrous enough, Acrux is one of the few remaining Keating-era pooled development funds. This means capital gains are not taxable and losses are not deductible.

Given the spectre of cut-price competition, buying into this one would be a ballsy call. Sell.

The Australian accepts no responsibility for stock recommendations. Readers should contact a licensed financial adviser. The author does not hold shares in the stocks mentioned.