westfield upgraded

Westfield Group upgraded on hopes of growth

Florence Chong
From: The Australian
January 30, 2010 12:00AM

WESTFIELD Group has been upgraded from neutral to overweight by a leading broking firm on the back of potential development opportunities, estimated at $14 billion.

US investment bank JPMorgan said in a note that it had revised its target price for the stock from $12.72 to $14.35. It closed at $12.64 yesterday.

Having toured each of Westfield's eight shopping centres in Australia, JPMorgan's head of property research, Rob Stanton, wrote that these and many of its other centres were being prepared for redevelopment.

Mr Stanton estimated that there would be $2.1bn of "near-term" development opportunities and $6.7bn in the medium term for the world's largest shopping centre owner.
He said its Australian centres were strong performers, with their specialty sales averaging $10,000 per square metre -- or 19 per cent higher than the Australian shopping centre average.

Mr Stanton said that for the first time in more than a decade, department stores, such as Myer and David Jones, that anchored shopping centres were planning to roll out new stores and Westfield was likely to sign six new leases this year
"We do not think the market is fully aware of or factoring in this scale of spend into WDC (Westfield's) pricing," he wrote.

While he did not expect further expansion of the US or British centres until 2012, he had identified projects on the company's own "strategic opportunities list", which will lift JPMorgan's global capital expenditure estimate to $14bn. Mr Stanton said funding was the key to unlocking its development opportunities.

Westfield's new payout policy was expected to release $500 million of cash each year. Starting from this year, the group will pay between 70-75 per cent of its operating earnings. This combined with its balance sheet gearing capacity would make available $4bn-$5bn of funding for development.