Why the WFD Unibal Rodamco UNIBALWEST/IDR share price is struggling

What REITs should you buy for income?

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Dividend-seeking investors may be interested in the recent results of the international Westfield shopping centre group now owned by European group WFD Unibal Rodamco (ASX: URW). Google Finance lists the group's ASX chess depositary instruments that can be traded via any broker as UNIBALWEST/IDR UNRESTR.

The combined group is now Europe's largest retail REIT after it acquired the Westfield assets assets mainly in London, New York, and California for around US$25 billion in late 2017.

Below is a summary of its results to June 30 2019 with comparisons to prior corresponding periods. 

  • Net operating loss of €47.1m
  • Recurring net operating profit of €264.9m when backing out one-off costs, valuation movements, etc
  • Dividends over 2018 of €10.80 per share
  • Occupancy of 93.4%, -90 bps below June 30, 2018
  • Total tenant sales +3%
  • URW trades on ASX as a CDI on a 20 for 1 basis
  • Portfolio attracts over 1.2 billion visits each year

The stock is off around 35% over the past year after the Paris headquartered group delivered a string of disappointing operating updates for investors on the back of weak retail conditions in Europe. The acquired Westfield businesses in London and the US have also performed softer than expected. 

The group retains a development portfolio in excess of €10 billion and invests heavily elsewhere to fight the rise of online shopping by making its shopping centres all round entertainment and dining destinations.

It is also focused only on only owning shopping centres in prime locations in major international cities, as it's believed this will help insulate it from the rise of online shopping. 

On an FX and CDI-adjusted basis the trailing yield is around A$0.77 per CDI (€0.54cps) to mean the stock yields close to an unfranked 5%. The stock also trades at a significant discount to the value of its net tangible assets to suggest it could be cheap if the business executes on its growth strategy. 

However, its complex structure and domiciling overseas may put off some local investors. As such other REITs to consider for income include Mirvac Group (ASX: MGR) or the ANZ focused operator of the Westfield shopping centres trading as Scentre Group Ltd (ASX: SCG).

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