Westfield Corp
Security price: $9.30
Industry: Property
Forecast distribution: US26 cents per security
Frank Lowy and his shopping centre operation, Westfield, have a long history in Australia, but Westfield Corp­oration is a relatively new compan­y.
Lowy split his Westfield Group last year, creating an Australian and New Zealand business, Scentre Group, and an international business, Westfield Corp. He believed creating two companies based in different regions would help to unlock value.
Westfield is listed on the Australian Securities Exchange but most of its operations are in the US. It is also exploring an offshore listing. This structure provides a strong platform for growth and means the company and unitholders should benefit from a falling Australian dollar.
While dividend yield isn’t sky high, the prospect of a weakening currency means the company is an interesting option for income investors seeking international exposure and growth.
Westfield’s strategy is to create unique shopping experi­ences, particularly flagship cen­tres, in the world’s great cities. It operates malls in cities including Los Angeles, Chicago, London and Milan, with 40 shopping centres, primarily in the US and Britain, valued at $28.5 billion; of those, 16 are flagship centres. In its first six months Westfield performed in line with forecasts, increasing net operating income 5.3 per cent.
Its $11.4bn development pipeline, including Westfield World Trade Centre in New York, should underpin growth.
Internet shopping is a challenge to retailers, and Westfield is looking to innovate by integrating technology, including online and mobile services, into its malls.
Any further weakening of the Australian dollar against the greenback will boost Westfield earnings and distributions when translated back into our currency. Seventy per cent of Westfield’s assets under management are in the US.
Westfield has a strong balance sheet, with $19.6bn of assets and a gearing ratio of 35 per cent.
Looking ahead, we expect income of about US26c a unit. At the present exchange rate of about US77c, that gives a forecast distribution of about 34c a unit.
On a current price of $9.30, the yield looks to be about 3.65 per cent. While not spectacular, that could rise with a falling Australian dollar. Westfield is also trading at fair value, making it a good option for income investors who want a hedge against a weakening dollar.