Should You Buy Scentre Group at this SharePrice?

What happened to the SCG share price?

Scentre Group [ASX:SCG] was doing very well today, rebounding with the commodity sector over the course of the trading day. The Aussie market was flat for the day; the market was generally confused with a dovish Yellen on one side, and improving commodity prices on the other. The overall market condition remains relatively stable.

Why did SCG shares do this?

A property developer, Scentre’s long term outlook is positive. In 2016 and 2017, it is expected that the company will report both revenue and profit growth. However, market analysts have an overall rating of ‘Hold’ on the stock, meaning that the stock is generally fairly-priced at the current market price.

Make no mistake; the company is extremely cheap on a P/E basis. The company also pays a handsome dividend. Growth rates for sales have been positive and margin is very high. Scentre has a manageable level of debt but could use more current asset to boost its liquidity position.

What now for SCG?

When it becomes active trading, it is possible for SCG traders to outperform a long-only investor by adopting a long/short strategy at an inter-day frequency. However, the particular model used for SCG can be quite complex, requiring a lot of agility from the trader. In addition to last week, this week should have seen a long signal on the stock. Next week should see another long position (given current price).

Fundamentally, the stock is healthy in its financial results. However, the question remains as to whether the stock is overvalued. It is possible to argue that the stock is cheap for any long term investor, particularly with P/E being at such a low level. However, it also needs to be noted that growth could slow down over the long term.

Ken Wangdong
Emerging Market Analyst, New Frontier Investor


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