The average target price of RGN.AX is 2.3 and suggests 2% downside potential. Usually, this means a SELL recommendation among investment firms, or a recommendation to decrease one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 2.5. This translates into 6% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 2.0. This is equivalent to 15% downside potential in the worst case. 

SCA Property Group (SCP) includes two internally managed real estate investment trusts owning a portfolio of quality neighbourhood and sub-regional shopping centres located across Australia. The SCA Property Group invests in shopping centres predominantly anchored by non-discretionary retailers, with long term leases to tenants such as Woolworths Limited, Coles Group Limited and companies in the Wesfarmers Limited group. The SCA Property Group is a stapled entity comprising Shopping Centres Australasia Property Management Trust (ARSN 160 612 626) and Shopping Centres Australasia Property Retail Trust (ARSN 160 612 788).

Australia

Region Group

Real Estate

The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are unclear. In the past 12 months, the dividend yield has been outstanding and can be rated excellent compared to its peers. At the same time, the average five-year yield has been significantly higher and exceeded nearly all its peers. The company distributes nearly all its profit as dividends (payout ratio above 90%, a negative factor). It will not be easy to sustain such an extreme payout ratio. It may also indicate a company's lack of profitable growth opportunities, which suggests doubtful prospects. On average, the company pays dividends twice a year. 

RGN.AX reported revenue of AUD 380mn in the last 12 months, up 2% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. Market expects EPS to reach AUD 0.15 in FY25.

The stock has been growing steadily in the past six months, adding 12% in total. The stock has outperformed its global peers from the same sector and industry (as shown above), surpassing them by 17ppts in total. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is 'fair'.

The company has reported strong EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 0.0% in the last 12 months, a decline from 64.9% in FY24. 

Historically, RGN.AX has reported very strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 35.3%, a growth from 4.6% in FY24. 

Region Group reported a return on equity (RoE) of 4.8% in the last 12 months, up from 0.6% in FY24. The market consensus projects an RoE of 0.6% in FY25, again behind its peers. 

In the last 12 months, the return on capital employed (RoCE) grew to 3.0%, below the peers. The consensus estimate for FY25 for RoCE is 4.7%, again behind the peers. 

Another important profitability metric, return on assets (RoA), amounted to 2.9% in the last 12 months, an increase from 0.4% in FY24. The market analysts predict that RoA will be 0.4% in FY25, again weaker than its peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.3 in the past several years. This ratio implies a weak shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

RGN.AX boasts high trading liquidity. The average private investor can sell his common position in the stock almost immediately. Liquidity is usually quite stable and is average on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. 

No other major risks have been identified.

The risk of default is high. Among the negative credit factors, we point to weak positions in its industry, slow historical revenue growth, negligible return on capital, excessive margin volatility, weak debt servicing capacity, and inadequate interest coverage. We note robust profitability, among the positive credit factors. 

In highly turbulent market conditions, RGN.AX is not volatile. In other words, the stock will fall far less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be very low. 

In normal market circumstances, RGN.AX is not volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will stay within a narrow range. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to negligible. 

Based on key historical and expected multiples, the stock is fairly valued relative to its peers. In particular, the stock is reasonably priced on P/E, of fair value on EV/EBITDA, trading at neutral levels on P/FCF. 

Region Group

A$ 2.41

6

Region Group

A$ 2.41

6

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

A$ 2.41

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