Vicinity Centres
(ASX: VCX)Share Price and News
About Vicinity Centres
Vicinity Centres manages, owns, and develops shopping centres across Australia. With a portfolio valued at around $24 billion, the company owns or co-owns more than 60 shopping centres, including Chadstone in Melbourne and Queens Plaza in Brisbane. Maintaining retail projects, development, leasing, and marketing are all part of Vicinity’s operations.
VCX Company History
Vicinity Centres was established in June 2015 when Federation Centres and Novion Property Group merged to form one of Australia’s top retail property groups. Federation Centres began as Centro Properties Group, which restructured following the GFC. The merger aimed to consolidate the company’s retail assets onto a single, efficient platform. After the merger, Vicinity sold properties it deemed non-core and reinvested the proceeds into its main shopping centres.
COVID-19 forced the shutters down on non-essential retail and sent Vicinity swinging from a $346.1m profit in FY19 to a $1.8bn loss in FY20. Although essential retailers in suburban malls mitigated the damage, its CBD assets were hit by people working from home and the elimination of tourism through border closures. The company undertook a $1.2bn capital raising in the early months of the pandemic and wrote down $1.79bn from its portfolio.
In FY21, Vicinity still made a statutory net loss but only $258.0m. In FY22, a period that included the Delta Lockdowns and the Omicron wave but also included the re-opening of Australia’s international borders. The company returned to NPAT profitability, making $1.2bn. Its FFO came in at $598.1m, or 13.1cps.
Its NPAT in FY23 was was just $271.5m, despite FFO being over $80m higher, at $684.4m (or 15c per share). You see, interest rates hit the valuations of its properties even with visitor numbers back to pre-COVID levels.
FY24 saw its profit improve to $547.1m and it made $492.6m in 1H25. The company has guided to FFO of 14.5-14.8c for the full FY25, compared to 14.6c in the year before. FY24 saw the company undertake 7 strategic asset sales and smaller developments including a new office tower to host the corporate offices of Kmart and Adairs (among others.
Future Outlook of Vicinity Centres (ASX: VCX)
Vicinity Centres has guided to 14.5-14.8c FFO for FY25. The key to the company's short-term future will be meeting this guidance, particularly because this was not that much higher than FY24.
In the near term, Vicinity expects a gradual rise in earnings driven by higher rents and increased occupancy. In the longer-term, its key developments (particularly One Middle Road) will be crucial.
In our view, the company is well-positioned due to its strong balance sheet, low debt levels, and numerous growth opportunities. A return of visitors to city centres, more shoppers at premium locations, and developments in major urban areas suggest a positive medium-term outlook.
However, challenges such as high interest rates, inflationary pressures, and reduced consumer spending pose risks to the retail industry, and by extension to VCX as one of the industry's major landlords.
Is VCX a Good Stock to Buy?
Vicinity Centres has grown 25% in the last year and now trades at a premium to its net tangible assets (NTA) for the first time since COVID-19. This may suggest it is overvalued, but it is not excessively priced above its NTA.
Those seeking steady and regular income may find VCX attractive due to its high and stable dividends. While a diversified mix of top retail locations offers security, factors like rising interest rates and reduced consumer spending in the short term could affect returns.
Nonetheless, investors should proceed carefully, considering the unpredictability of the market and retail spending trends.
Our Stock Analysis
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Frequently Asked Questions
Vicinity Centres offers a forecast dividend yield of over 5%, based on its FY23 distribution of 12.0 cents per security. This yield is attractive for income-focused investors, especially within the REIT sector.