International property developer Westfield Corp Ltd (ASX: WFD) delivered decent first-half results to the market today, although they're not as good as they might appear when compared to the first half of 2014's results.
Westfield itself warns investors that comparative figures are effectively meaningless, since Westfield Corporation includes several business segments (as a result of last year's restructure) that are compared to only one segment – the former Westfield America Trust ('WAT').
For this reason I haven't included comparative figures from last year in today's report:
- Revenue of US$848.2m
- Profit after tax of US$465.9m
- Funds From Operations* ("FFO") of US$380.3m, or US$0.18.3 cents per share
- Continued progress toward flagship asset development such as Century City in Los Angeles and UTC in San Diego
- Gearing* of 32%, interest cover** of 5.0 times
- Flagship portfolio achieved 10% specialty sales store growth while Regional portfolio grew 4.9%
- Of projects already underway, World Trade Centre is fully leased and opening in first half of 2016, while The Village in Los Angeles is 95% leased and opens in September with targeted yields of 7-8%
- Full-year outlook confirmed at US$0.377 cents per share and dividends at US$0.251 cents per share
*debt divided by debt + shareholder equity
**the amount of times a company can pay its annual interest expense from its Earnings Before Interest and Tax (EBIT)
So What?
It's interesting to note that despite Westfield's focus on flagship centres, currently the regional portfolio is actually delivering a higher average yield, at 6.32% compared to 4.84% for the flagship US and UK properties.
This statistic is expected to change over the next five years however, as Westfield's mega-projects like World Trade Centre and the revamp of London come to the fore. Targeted yields of 7-8% from these projects also eclipse the 6% currently generated from the regional assets and reflect a decent return on Westfield's investment.
As current projects come to completion, Westfield's portfolio is expected to rebalance more equally between the UK/Europe and the US, while 85-90% of its funds will be in flagship assets. This makes Westfield a reliable way to gain foreign currency exposure and exposure to the popularity of some of the most desirable real estate on earth.
Now What?
This initial report from the restructured Westfield appears promising, with flagship specialty sales increasing by 8.6% and regional rising 4.5%, two very strong performances. Former Westfield alumnus Scentre Group Ltd (ASX: SCG) is delivering comparable performance, but without the foreign exchange benefits.
Debt remains in check, earnings are in line with forecasts and development appears to be proceeding as promised. The business doesn't appear too badly priced either, and for investors chasing long-term growth and pure foreign-currency exposure it's hard to go past Westfield Corp.
