Vicinity Centres tops guidance, ties up Lakeside Joondalup stake
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The news: Shares in Vicinity Centres edged higher on the ASX after topping its full-year earnings guidance and settling the $420 million acquisition of a 50% stake in Perth's Lakeside Joondalup shopping centre.
The numbers: The shopping centre owner reported full-year net profit after tax of $547.1 million, more than double its FY23 result of $271.5 million. Revenue rose 3.3% to $1.32 billion while funds from operations (FFO) of 14.6 cents per security topped guidance of 14.1 cents to 14.5 cents.
Vicinity declared a final distribution of 5.9 cents per share, bringing the full-year distribution to 11.75 cents per share, down from 12 cents in FY23.
It guided FFO per share in FY25 to be within the range of 14.5 cents to 14.8 cents, with adjusted funds from operations in the range of 12.3 cents to 12.6 cents per share.
Meanwhile, the company has settled the purchase of a 50% stake in Lake Joondalup from the Future Fund. Vicinity said the shopping centre generates annual retail sales of nearly $800 million, describing it as a "flagship asset" for its shareholders.
Vicinity shares were up 0.5% to $2.19 by 11:35am AEST.
The context: Vicinity said that elevated costs of living tempered retail sales growth in the second half of the year, but retailer confidence to sign new leases remained robust. The company leased more than 230 vacant shops in FY24, ending the year with occupancy at 99.3%, its highest point since before the pandemic.
Jarden analysts said it was a stronger-than-expected FY24 result, which highlighted Vicinity's strong portfolio despite a slowdown in retail sales and leasing momentum. FY25 guidance is slightly ahead of consensus expectations, they said.
What they said: "The bears will likely argue that retail momentum will slow down from here but given the resilience in leasing momentum and long-term leasing contracts, we believe earnings momentum will remain solid, especially with pre-commitments of the major developments suggesting limited leasing risk and strong returns," Jarden analysts said.
"We believe [Vicinity] is well positioned for outperformance, trading at a 5% discount to [net tangible assets] and offering a 5.6% dividend yield with an attractive medium-term growth outlook," they noted.
Commenting on the Lakeside Joondalup acquisition, Vicinity's CEO and managing director Peter Huddle said: "Lakeside Joondalup is a fortress-style retail asset located in one of Perth's principal activity centres and has been on our target list for some time".
"Geographically, the suburb of Joondalup has been earmarked to become Perth's second Central Business District and enjoys a captive and growing population, which is expected to drive above average retail sales growth over the next decade," he said.
"Importantly, Vcinity has also secured the property and retail development management rights for Joondalup, which provides the opportunity to utilise our retail management platform to drive asset performance, whilst earning additional fee income."
The sources: ASX announcement, ASX announcement, Jarden research
