Why Scentre Group Is a Buy

Scentre Group [ASX:SCG] was established in June 2014 after a merger of the Westfield Retail Trust and Westfield Group’s Australia and New Zealand’s shopping centre assets. SCG manages design, development, and construction of their shopping malls. In addition to this, they manage the leasing, retail management and marketing of their portfolio. In total, Scentre Group has 47 shopping malls, with over 12,600 retail outlets inside.

At the time of writing, SCG was trading 0.96% lower, at $4.65 a share.

Why did Scentre Group shares do this?

Today’s fall in the share price has more to do with investors taking profits than anything else.

SCG shares reached an all-time high of $4.75 on 3 May. Even though the share price has fallen to $4.65 since then, SCG is still up 10.5% for the year to date.

Recently, quarterly results for the company showed that comparable specialty store sales were up 4.5% — based on a proportion of floor space — and turnover for SCG is nudging $10,905 per square metre.

SCG reports that their floor space is almost fully leased.

Furthermore, the shopping mall giant of Australia has $1.3 billion of centre developments in the pipeline. Big businesses don’t commit billion of dollars if they don’t think the return on investment is there.

What now for SCG Ltd?

Scentre Group is seizing on the shift in consumer habits.

Shopping centre developers base construction and redevelopment decisions on a 10–15 year cycle. These decisions take into account demographics when determining where to construct new developments.

Scentre Group is focused on increasing the presence of international retailers within their malls, as well as developing entertainment precincts within the centres. These entertainment precincts are a mix of dinning and bars, children’s entertainment, and other leisure activities for all age groups.

SCG’s model moving forward will be to attract shoppers first, before shifting how they spend their leisure time inside the malls.

In other words, they are looking for new ways to keep consumers in the centre for as long as possible.

Whatever happens, Scentre Group is leading the way with this shopping centre revolution.

Keep your eye on it; today’s share price fall is only likely to be temporary.

Shae Russell

Since starting out in the financial markets over a decade ago, Shae has extensive experience across various aspects of the industry. Shae cut her teeth in the derivatives industry, teaching clients basic trading techniques with technical analysis.

Joining Fat Tail Investment Research eight years ago, Shae has worked across a number of publications, such as Australian Small-Cap Investigator, Gold Stock Trader and Microcap Trader. She’s spent the past two years however, honing her macro analysis skills alongside Jim Rickards, showing Australians how to invest and profit form global macro trends.

Drawing on her extensive experience, Shae is a contributor to Money Morning, and lead editor of sister-publication Markets & Money, where she looks at broad macro trends developing around the world, combining them with her distaste for central banks and irrational love of all things bullion.

Money Morning Australia