Should you buy, sell or hold the new Westfield Corp?

This business looks to be more growth focused post the restructure, although income potential remains reasonable.

Tom Richardson

Tom is a holder of the CFA Society of the UK administered Investment Management Certificate (IMC) and has more than a decade's professional experience in the investment management industry in Australia and the UK. Tom now works as a writer and editor for TMF Australia and has two easy to remember rules of investing he likes to follow. Avoid overpaying for growth stocks and avoid paying at all for stocks that are cheap for a reason. Tom prefers growth investing over value investing and says it's not rocket science, just avoid overpaying for the best returns.

Published July 9, 2014 11:25 am AEST

The newly formed Westfield Corp (ASX: WFD) now manages Westfield's iconic shopping centres in the United States and Europe, with an intention to grow worldwide through more developments in the world's major cities. The timing of Westfield Corp's strategic realignment seems a happy coincidence (or not), as it is just after the US and UK economies appeared to start a strong rebound. This rebound has the potential to deliver big rental increases and better sales performance in the new entity's core markets.

Westfield Corp's overall vision is to cater to the shopping, entertainment and dining needs of consumers worldwide, as it pioneers the evolution of modern shopping as a destination experience. This primarily in response to online headwinds some believed would see shopping centres decline in popularity.

The other part of the vision is to concentrate on iconic shopping centres in the world's major cities, with a focus on premium brands and retailing. Step up the new Westfield World Trade Centre, New York, scheduled for completion in 2015. It's not alone and the new Westfield Corp has a huge development pipeline including other centres in Milan and London, which means the stock's outlook is tilting towards growth as well as income. That's reflected in the fact that at $7.38 it trades on around 17.5 times projected FY14 earnings.

The distribution in FY 2014 is forecast to be US24.6 cents per security, so selling for $7.38 that's an approximate FX-adjusted yield of 3.8%. Income-focused investors should note distributions will be paid in U.S dollars so with the Reserve Bank of Australia's governor warning the Australian dollar is significantly overvalued, steady depreciation may prove another nice tailwind.

Overall I think the new entity looks a solid long-term buy for investors seeking security, income, and a touch of growth. The Australian and New Zealand assets are now part of Scentre Group Ltd (ASX: SCG), while other large property operators like Mirvac Group (ASX: MGR), Stockland Corporation Ltd (ASX: SGP) and DEXUS Property Group (ASX: DXP) remain alternatives for domestic investors.

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