Scentre Group Earnings: Strong Trading Lifting Scentre Back to a Position of Strength

Scentre Group delivered a strong 2023 annual result, with its centers trading robustly. Funds from operations rose 5.2% to AUD 21 cents per security, and distributions grew 5.4% to AUD 16.6 cents, exceeding guidance and our estimate of AUD 16.5 cents. Near-term risks include a possible recession, retail slowdown, or the risk of interest rates staying high. However, this is balanced by strong population growth, which is slowing but remains at high levels, incoming tax cuts for Australians, and Scentre’s leases to a strong list of tenants. We assume 2024 FFO of AUD 0.22, implying 3.8% growth, just below the midpoint of management’s guidance range of AUD 21.75-AUD 22.25 cents. We assume distributions of AUD 17.2 cents, with management targeting DPS of at least that level.