What is Happening to the Share Price of Vicinity Centres?

What is Happening to the Share Price of Vicinity Centres?

What does Vicinity Centres do?

Vicinity Centres [ASX:VCX] is an Australian Real Estate Investment Trust company specialising in ownership and management of Australian shopping centres.

Chadstone is Australia’s largest shopping centre and Vicinity owns half of it, with John Gandel owning the remaining half.

The company has development in the pipeline of about $3.1 billion, which includes the $622 million Chadstone redevelopment in Melbourne.

What is moving the VCX share price?

On 17 February the company posted their full year results, and they were positive.

  • Underlying earnings of $377.6 million, up 10.1%
  • Earnings per share, up 9.3%
  • Portfolio occupancy increased by 30 basis points to 99.2%
  • The Chadstone store saw specialty store sales growth of 5%

Consumer spending appears to be strong, the shopping centres are reporting an increase in services such as manicurists, laser clinics and teeth-whitening booths.
Hair, beauty and optometrists are also trading strongly. Technology shops, cinemas and food courts are likewise expanding space.

This sort of discretionary spending on manicurists and the like indicates the consumer has some confidence in the economy. Tourism has also been a big boost for the company, in regard to sales at their Direct Factory Outlets’ (DFO).

What now for Vicinity Centres shares?

A quick look at the chart reveals no cause for concern. Based on the first half results, the centres are performing well. It really depends on the confidence of the consumer.

Employment is steady, GDP growth keeps surprising to the upside, interest rates are low, the housing market is driving downstream sales growth, and tourism is booming.

Credit rating firms Moody’s and Standard and Poor’s have both recently given the company a tick of approval.

Both firms issued investment ratings last month, with Moody’s providing an A2 rating, while S&P affirmed its A- rating, describing the group as ‘stable’.

As long as employment holds steady and the consumer still has confidence, it’s hard to see how Vicinity and similar types of stocks will fall over.

Terence Duffy,
Research Analyst, Cycles, Trends and Forecasts

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