Stockland kicks off good results

Slow shopping mall trading and rising impact of the coronavirus on retailers is expected to be offset by the improving fortunes of residential developers.

Stockland is forecast to turn in a strong result this week.

The weakness of shopping mall trading and the rising impact of the coronavirus on retailers is expected to be offset by the improving fortunes of residential developers.

The country’s largest residential developer, Stockland, is forecast to turn in a strong result when major property companies report this week.

Investors are tipping it will provide an upbeat outlook for the housing market on the back of ­rising auction clearance rates.

Stockland and Mirvac are selling more lots at ­estates along the eastern seaboard as they benefit from rising market sentiment, changes to lending criteria and the federal government’s first-home buyer scheme.

The focus on Tuesday will be on Stockland and how it is seeking to benefit as auction clearance rates top 80 per cent, even as listing volumes rise and more sales are made at its ­estates.

After some “one-off” earnings last year, investors want Stockland, led by Mark Steinert, to spell out how it will hit sales goals this year and, longer term, its strategy for boosting margins by under­taking more medium-density and high-rise projects.

CLSA analyst James Druce said residential trusts Mirvac and Stockland had outperformed the REIT sector and ASX 200, and the catalyst had been last May’s ­federal election that signalled the low point in the residential market.

However, luxury retail precincts including Westfield Sydney and Melbourne’s Chadstone Shopping Centre are exposed to declining tourism from China as luxury shoppers from the mainland can no longer easily enter Australia.

But shopping centre owners Scentre, owner of the local Westfield empire, and Vicinity Centres are expected to come under scrutiny as their operations were ­exposed to widespread bushfires, fashion chain collapses and the impact of the corona­virus.

Both Scentre and Vicinity Centres have taken extensive measures to improve their port­folios and investors will be expecting updates on Scentre’s develop­ment pipeline, which includes the retail component of Sydney’s Central Barangaroo.

Vicinity last year dropped plans for a wholesale fund and ­investors will want updates on the progress of its disposal program, its plans for mixed-use sites and ­recent moves to boost the size of its DFO portfolio.

All eyes are on the valuation of centres with a large exposure to department stores, particularly after the market was reset by the sales of large centres in Perth and Adelaide last year.

Mr Druce was cautious about the mall landlords but said some high-profile troubles may not have such an impact longer-term.

“It is difficult to see the retail names performing well through reporting season, given we don’t see a change to soft income growth and declining net tangible assets growth,” he said. “However, we believe bushfires and voluntary administrations are more noise than substance.”

Property results have also put on display the split between fund managers such as the Goodman Group, which manages a $50bn global industrial property empire, and Charter Hall, which reports at the end of this week, and more traditional landlords.

Charter Hall has grown to run about $40bn worth of trusts in Australia and its focus on office, industrial and other long-leased property is allowing it to rapidly boost earnings.

Charter Hall has had strong ­results from its office, logistics and long-leased property funds, prompting an earlier earning ­upgrade for the manager.