Westfield Group (WDC)

By Jason Fittler

WDC is the world´s largest listed retail property group.

Astute management and a highly successful business model justify WDC trading at a premium to peers.

WDC is an internally managed, vertically integrated shopping centre group. It builds and operates shopping centres on both a wholly owned and joint venture basis. Normally around 85% of group revenue comes from its property portfolio, with the remainder coming from property development and management.

Balance sheet gearing is 36.7% and look-through gearing of 38.4% (December 2010) with 79% of debt at a fixed rate and WDC has a war chest of $7.3bn for new developments or corporate activity.

We have valued WDC on a discounted cash flow basis, cross referenced against distribution yield and relativity to Net Tangible Assets.

Reflecting the robust core revenue from the resilient shopping centre portfolio, offset by management guidance for improving growth in most markets, increasing cost of debt and growth in development, we have a Fair Value of $10.55 per unit, it is currently trading at $8.95.

At this price we are recommending a buy on the stock making it a long term core holding in your portfolio.

We acknowledge that the property sector will take some time to recover but while it is paying a 7.06% yield I am happy to hold for long term growth.

For more information on Westfield Group (WDC) please contact us on 07 4771 4577.