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Business Description: CFS Retail Property Trust Group (CFX) is a retail sector-specific Australian Real Estate Investment Trust (A-REIT) which invests in retail assets including super-regional, regional, sub-regional and retail outlet shopping centres across Australia. CFX‚Äôs responsible entity is Commonwealth Managed Investments Limited.
Strategy Analysis: CFX owns and manages shopping centres in Australia. Centres are located close to major metropolitan areas and are anchored by long-term leases with supermarkets and department stores. Small specialty stores feed off the stable consumer traffic generated by the major retailers and pay higher rents. CFX aims to expand and diversify its portfolio through the redevelopment of existing sites and further acquisitions within Australia. Funding is sourced from debt, equity and strategic asset sales. Expansion of existing centres creates meaningful value over the long-term with relatively low risk, dependent on growing populations and barriers to entry for potential competitors. Acquisition of a portfolio of Direct Factory Outlets increases future growth options but at the lower quality end of the spectrum. Near-term focus is on selling assets, either 100% of smaller malls or 50% stakes in large malls. Proceeds will fund developments and security buybacks or reduce gearing. Improved geographic diversification via acquisitions is a longer term goal.
CFS Retail Property Trust Group reported NPAT down 37% to $126.4m for the half-year ended 31 December 2012. The decrease is primarily due to differences in investment properties revaluations between the two periods. Revenues from ordinary activities were $371.2m, down 23% from the same period last year. Diluted EPS was 4.35 cents compared to 7.14 cents last year. Net operating cash flow was $165.0m compared to $150.3m last year. The interim dividend declared was 6.8 cents compared with 6.5 cents last year. Looking ahead, the Company reported that while the retail sector continues to face a number of challenges, the Company is encouraged by improvements in some underlying drivers of retail expenditure.
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