Scentre Group recently released a first-quarter CY17 trading update, with the mall owner providing no surprises when it reiterated guidance for growth in CY17 funds from operations of 4.25%.
Ord Minnett sees the regional mall REITs as oversold and sees Scentre as the best way to play this theme given the following drivers.
Firstly, Scentre owns the best portfolio, with impending transactional evidence that we think will show its book values are highly conservative.
Secondly, Scentre has a strong, low-risk earnings outlook with 4–6% per annum growth over the next three years boosted by debt-funding its growing development workbook.
We reiterate our Accumulate rating on Scentre and maintain our target price of $4.80.