SGP - Stockland Group

One thing just to note was that the market got a big relief from SGP not raising capital (which was a very low probability outcome) but also from them reconfirming their FY14 dividend would not fall from the current level of 24 cps. Reasons for being cautious include the fact that they probably won't grow their dividend for some time.

1. They are currently paying out well over 100% of earnings and earnings growth will probably take some time to re-assert itself (FY14 will probably show big growth over a terrible FY13, but beyond that)
2. Their payout ratio is even further above AFFO as they capitalise more of their interest bill than they expense through the P&L. It will be interesting to see if this corrects itself at all as a result of the impairments they have taken
3. A small fact that not many have picked up on is the capital reallocation they have been forced to do, reallocating $500m of equity from trust to company. SGP is a stapled group with a trust and company. Generally, to minimise group tax expense, the company is geared up to a very high level by borrowing from the trust (a notional "paper" loan). This loan generates interest expense in the company which reduces taxable earnings. A corresponding interest income is recorded in the trust, which is of course tax free. By doing the $500m capital reallocation, this reduces this synthetic tax shield and so will also hamper earnings growth going forward.

coolcup said:

.....A small fact that not many have picked up on is the capital reallocation they have been forced to do, reallocating $500m of equity from trust to company. SGP is a stapled group with a trust and company. Generally, to minimise group tax expense, the company is geared up to a very high level by borrowing from the trust (a notional "paper" loan). This loan generates interest expense in the company which reduces taxable earnings. A corresponding interest income is recorded in the trust, which is of course tax free. By doing the $500m capital reallocation, this reduces this synthetic tax shield and so will also hamper earnings growth going forward.

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I saw this as a lessor of two evils. The interest on the transfer stays within the group where capital raising or borrowings would be more dilutive to shareholdings. The share dipped today pretty much in line with the rest of the market. Pity, I was looking for the share to test $4.00 but it stalled immediately after open, struggled to hold $3.95 - $3.96 then dropped quickly on relatively small volumes to the $3.89 - $3.90 area.

Tomorrow is options settlement day, according to my calander. I'm curious to see if this impacts on the sgp share price.

No sooner did I say that the transfer could be the lessor of two evils, SGP went and raised $400 Million from Institutional Investors at $3.88. Naturally the market took this in it's stride and slashed the price to $3.87. Then the off-shore investors said "stuff this, we are taking our money and going home" and the price fell to test the last suport levels of $3.65 - $3.66.



And then SGP announced to the market that it wanted to raise a further $100 million from Retail Investors also at $3.88 with a maximum of $15,000.00 per shareholder. As much as I like SGP, why would I buy more ay $3.88 when I can buy on market at $3.66 (and possibly even cheaper next week). Go figure...

As always do your own research and good luck.

F&P Daily Update.

Am i missing something PB?

The Auction clearance rates were up again over the weekend. Glen Stevens from the RBA keeps talking about interest rate cuts to stimulate the economy and people see now as a good time to be overleverageing to buy property, silly buggers. Notwithstanding, this seems to give the share prices of the likes of Australand and SGP a lift.



Don't be surprised if there is a rally on Monday (could be brief). Personally I think the share price is at the epper end of its price range at the moment. As always, do your own research and good luck.

Although SGP has dropped from recent highs to test June 2013 levels it actually appears to travelling in a sideways and upwards channel. SGP has received some support since the RBA dropped the official interest rates and auction clearance rates rebounded. With Mr Stephens and his fellow RBA board members talking down our economy there is little risk of an interest rate rise (unless the falling dollar pushes fuel prices through the roof and inflation become an issue).



I suspect SGP will rebound from its' current price level and trade in a sideways channel. Then again I could be totally wrong. As always do your own research and good luck.

SGP not only didn't rebound from the low $3.70's but tested $3.60 where I was waiting with a low ball bid on Tuesday. Not confident that it was the "low" but happy to enter for the prospects of a small spread trade exit at $3.66 on Wednesday, even though it wasn't the "high" ($3.67) for the day. I admit I can't pick with accuracy the "highs" and "lows" but if I can get close enough, often enough I can collect between 1-2% per trade and it all ads up.



This is not a recommendation. As always do your own research and good luck .

SGP rebounded from the lower channel bar $3.60 mark to test $4.00 over the next couple of weeks. Then SGP ventured into Australand for a strategic stake of 19.5% and the market reaction was a sharp sell down to the $3.70 levels.



$3.70 appears to be a support level over the last week or so, however after the Dow fell Friday & Monday I suspect SGP may drop below the trend line today. There is some possibility of traders turning to REIT's as more secure stocks which could reduce any drop. We will just have to wait and see.

SGP rebounded a little along with the rest of the A-REIT's. However, in comparison with the rest of the A-REIT's, SGP did not soar like an Eagle but literally flapped like a chook with its' wings clipped. I suspect it has caught the US market cold "fear of an interest rate hike due to improving economic conditions". Any increase in aussie interest rates could have a sudden and dramatic impact on SGPs' prospects.



Personally, I'm keeping it on my radar for an entry if it drops into the low $3.70's. Sometimes traders forget that SGP doesn't just do residential. As always do your own research and good luck.

SGP has continued to find support, trading in a gradual sideways but upward channel. The recent report and prevailing conditions have encouraged investors to lift the share price surpassing the March 2010 highs.



While the recent share price runup has been sharp and will likely falter, the long term aspects appear promising. Recent publicity has Stockland selling interests in some major assets. Combining the proceeds of these sales with the profit from their Australand foray could provide them with a good war chest for a tilt at the Leighton property portfolio, without sending their debt gearing levels to untenable levels. As always do your own research and good luck.

I am bullish on Stockland, based on a wave structure it is in the early stages of a "3 of 3" advance and should accelerate towards $6 mark in a 12 months period.
Now when 2010 highs are broken, it should make an accumulation-sideways movement in a 4.20-4.30 area and then a massive "gap and go" wave is ahead.

Only if SGP crash from current levels below latest bottom of 3.9 it will immediately jeopardize the bullish scenario.

rimtas said:

I am bullish on Stockland, based on a wave structure it is in the early stages of a "3 of 3" advance and should accelerate towards $6 mark in a 12 months period.
Now when 2010 highs are broken, it should make an accumulation-sideways movement in a 4.20-4.30 area and then a massive "gap and go" wave is ahead.

Only if SGP crash from current levels below latest bottom of 3.9 it will immediately jeopardize the bullish scenario.

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Interested in a marked up chart.
Why don't you see the last 4 yrs as accumulation?

Accumulation always means a correction in a Trend, and last 4 years can't be described as Correction, because this would mean as the trend is still down and SGP will eventually falls to new lows. I do not say that this is impossible because in the market everything is possible, but a good evidence supporting a bullish case is that a crash to 2009 bottom was not Impulsive, it consisted of two ABC overlapping corrections which means that sooner or later SGP will be at a new all time highs.

But I am not going to analyse a trend that will take decades, because we need to make money in a shorter term. And focusing on this let's take a closer look what happened when the 2009 bottom was set up.

The 1st wave was definitely a Leading Diagonal with a clear 33333 subdivisions-it is a typical start of the Impulsive advance after a Crash. Later a three wave correction followed to 2011 higher bottom. Since then the market is not in hurry to form the clear Impulsive rise and instead it is sporting a rising overlapping structure which I think can be labelled as a series of first and second waves. If it is a 3 (or C) Wave in progress, we will eventually see it consisted of 5 Waves and the upcoming break of an Acceleration Channel (at around $4.5) will confirm that a "gap and go" move is in progress on a weekly scale.

This will be very important because it means that market will start to move quickly and Impulsively, no more overlapping waves at this stage. The good initial Target Area for the market to slow down and start sporting a bigger scale sideways correction could be a 61,8% retracement level and a (X) wave area of a 2009 Crash. This is a level above $6 so a +50% rise from current levels.
I also hold ABP which has a similar structure but it holds an even more bigger potential to rise times to 61,8% level.

That is how I personally see a Bigger Picture which could prove that I am wrong if SGP close under Acceleration Channel(currently it is at $3.8). Until it is trading in a Channel or above it is a bullish Case.

Anyone could ask what would be the reason of this kind of bull developing, and I can answer simple-in a 2009 Crash the real estate prices in Australia had fallen very little compared to real estate stocks which most of them plummeted 70-90% from their peaks. Now Real Estate prices recovered but stocks still underperforming so they should start to follow soon.

It is just my thoughts guys, I keep in mind all possible scenarios but presenting only those that appears tradable to me. The bottom line is to buy and place a stop into positive area, then keep your investments in the market and see how waves are developing.

The share price not only faltered but dropped to the lower channel bar tapping $3.83 on 14 October 2014. Fortunately from there the share price clawed its way back to the present mid $4.20's. Puting it in perspective, SGP has now recovered to the post gst rebound highs of August 2009.



In reality SGP has tracked sideways since 2009 with share price resistance around the $4.15 mark. There has been a lot of restructure, FKP (Aveo) has been sold off, the stake in Australand has been sold off (for a good profit) and the property portfolio has undergone significant rebalancing through sales and acquisitions (mostly office, retail and residential). SGP is probably in the best position it has ever been. Cashed up for further acquisitions, perhaps some share buy back? This with the prospects of low interest rates for the immediate for-see-able future, no doubt, is also helping investor confidence.

However the A-REIT sector as a whole is moving in realms of price/earning ratios between 12-16 and SGT is presently trading with a price earnings ratio around 18.42, with a yield of around 5.7%. Having taken three (3) years to lift the share price by one dollar, I suspect that, in the current global economic conditions, it would take a huge lift in earnings and yield to see the share price rise to $6.00 in the next twelve (12) months. Hopefully the previous resistance level of $4.15 can become a support level as SGP continues to move sideways and upwards in the existing channel. As always, do your own research and good luck.

nulla nulla said:

it would take a huge lift in earnings and yield to see the share price rise to $6.00 in the next twelve (12) months.

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I would put it diferently-the market will expect a huge lift in earnings and yield and thus the price will rise towards $6. Earnings doesn't need to rise in order for the stock to appreciate. It is enough that optimism towards future would rise.
12 months is off the table, as SGP made a new low below 3,9 with current drop. I have no idea how long it would take, but based on a wave count the rise will be much steeper on a time scale than we have now. Channeling technique points to approx. this interval(12mo) but it actually depends what kind of corrections will be on the way.
Earnings doesn't matter. They tend to fluctuate with broader market trends and predicting them has no value in determining how much stock should rise/fall according to numbers on balance sheets.

SGP is another share that seems to have gapped down away from the previous pattern tracking the A-REIT Property Sector (xpj).




I find this all the more curious as SGP is one share that would benefit most from the Interest rates being kept low and or the prospects of interest rates going down. That $4.05 level looks very enticing to me. Particularly with the dividend of $0.12 coming up for year end. Mind you the XPJ has gapped upward from the All-ords (XAO) so maybe SGP tracking the XAO is in sync with the market and it is the rest of the sector that is out of sync?

Then again, Rimtas might have confused everyone with his Elliot Wave analysis and everyone stopped buying .

As always do your own research and good luck.

Hi nulla

I think what you are seeing here is that WDC is a big part of the A-REIT index and has rallied strongly off the back of the the falling Australian dollar (a lot of their assets are in the US). This has forced the A-REIT index up, while other domestic only stocks have lagged and appear to have underperformed.

coolcup said:

Hi nulla

I think what you are seeing here is that WDC is a big part of the A-REIT index and has rallied strongly off the back of the the falling Australian dollar (a lot of their assets are in the US). This has forced the A-REIT index up, while other domestic only stocks have lagged and appear to have underperformed.

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I partially agree with you. However, Westfield is not as large a part of the A-REIT sector it was before the restructure hiving off assets to SCG. While Westfields share price performance is enhanced by the perception of a US recovery combined with the impact of the falling Aud$, it is not enough for Westfield to take all the credit for the overall sector impetus. GPT for instance is a locally based A-REIT and is testing six year highs as are several other locally based A-REIT's. More likely a surge of foreign investors coming in on the low Aud$ combining with local yield chasers (IMO)

What I am pointing out here though, is that SGP is presently lagging behind the sector. It is also lagging behind GPT which is historically most unusual. Is it possible the price action for SGP is indicative of some large accumulation underway? Perhaps the volume action specialists could offer an opinion?

Hitting an interday high of $4.27 SGP is only a hairs breadth away from breaking through the resistance level of $4.28.



SGP is still out of sync with the likes of GPT. It remains to be seen as to whether SGP can push higher or fades in the new year after it goes ex-div on 29/12/14. As always do your own research and good luck.