SCG share price in focus
Scentre Group is a real estate company focused on shopping centres. The group operates under the Westfield brand in Australia and New Zealand.
Today, Scentre has a portfolio of 42 centres valued at more than $34 billion. Their occupancy rate sits above 99% and the centres receive more than half a billion visitors each year.
The company’s centres are located in prime trade areas, anchored by long-term tenancies with retail outlets that appeal to various consumers across fashion, dining, leisure and entertainment.
REA shares
REA Group, best known for its realestate.com.au platform, is a Melbourne-based real estate advertising company majority-owned by News Corp.
Today, REA Group operates property websites in around 10 countries used by some 20,000 property agents. In a typical month, the core Australian website gets over 55 million visits. While the business has diversified globally, Australian operations still account for the bulk of revenue. Within Australia, REA makes money by listing properties for sale or rent and charging listing fees. They also have a financial services arm offering services like mortgage broking, but this is a much smaller part of the business.
REA’s competitive advantages, like any other established platform, are network effects and economies of scale. In other words, Domain (the #2 market player) is significantly smaller than REA in terms of users and views. This gives REA greater market power and pricing control. REA also benefits from owning assets across all parts of real estate, including listing, advertising, mortgage broking, and house sharing.
SCG & REA share price valuation
One way to have a ‘fast read’ of where the SCG share price is could be to study something like dividend yield over time. This can give us a sense of the stability of the company and whether they can consistently pay out a percentage of profits.
Remember, the dividend yield is basically the ‘cash flow’ to a shareholder, but it can fluctuate year-to-year or between payments. Currently, Scentre Group shares have a dividend yield of around 5.00%, compared to its 5-year average of 4.78%. In other words, SCG shares are trading higher than their historical average dividend yield. Be careful how you interpret this information though – it could mean that dividends are growing, or it could mean the share price is falling, or both. In the case of SCG, the annual report shows last year’s dividend was greater than the 3-year average, so the dividend has been growing.
Since REA is more of a ‘growth’ company than an established blue chip, a price-sales ratio might be a more appropriate assessment. This ratio gives us an idea of how the company has historically been valued relative to its earnings, which can indicate if the company is over or undervalued today. The REA share price currently trades at a price-sales ratio of 17.61x, which compares to its 5-year long-term average of 17.41x. So, its shares are trading above their historical average. Don’t forget, a simple multiple like this should only be the start of your research. The Rask websites offer free online investing courses, created by analysts explaining things like Discounted Cash Flow (DCF) and Dividend Discount Models (DDM). They even include free valuation spreadsheets! It’s a good idea to use multiple valuation methods to value a share like Rea Group Ltd.
