Análisis de los Informes de Evaluación del IPCC

It was only mid-way through 2014 when the Lowy’s concept of splitting into a domestic REIT and a Global REIT/development company almost got voted down by a handful of domestic institutional investors. What an error that would have been as $12bil of shareholder value creation has occurred since the split. Yep, a cool +$12bil.

I think I can take some credit for at least attempting to get Westfield shareholders to vote in favour of the deal (Frank-ly you

should give a damn) and our subsequent aggressive support for WFD on a USD, Oil and US consumer view.

Supporting the split was the right call, switching from SCG to WFD post-split was the right call, going even harder when the Lowy Family themselves increased their WFD stake was the right call, and today I am going to tell you why sticking with WFD and the Lowy Family remains the right call despite my medium-term (top of the market) WFD price targets being smashed through.

At the macro level my attraction to WFD is increased by the sustained fall in oil prices, the race to the bottom in global interest rates, the bond yield effect on cap rates, yield compression in tier 1 property assets, falling debt costs and USD translation. This all bodes well for the US, UK and even Eurozone consumer, remembering the true “wealth effect” is property but no doubt cash rates, petrol prices and employment levels play a role in consumer sentiment.

What also interests me is the growing wealth divide between high income and low income earners. QE and ZIRP have clearly exponentially increased the wealth of the wealthy. WFD is superbly positioned to capture a greater proportion of that wealth effect in its core demographics. The strategy of creating and operating flagship assets in major markets is exactly the right one. Note well in the slides below: NOTHING in Middle America, NOTHING outside of London, NOTHING in peripheral Europe.

Westfield is a GROWTH stock: they currently have a $11.4b pipeline of current and future developments. These include Westfield World Trade Centre in New York, Century City in Los Angeles and the expansion of Westfield London and Valley Fair in Silicon Valley.

Once completed, this pipeline of flagship developments will represent 80% of the total portfolio and WFD’s business will be more evenly weighted between the US and UK/Europe.

WFD clearly has “plenty on” over the next 5 years. It was encouraging to see Peter Lowy reconsider his position and agree to remain Co-CEO with his brother Steven. Must have been Guillaume’s cooking….

The WFD balance sheet is STRONG with 35.1% gearing, 5.2x interest cover and $3.6b in available liquidity.

Arguably these offshore assets should be listed offshore and I wouldn’t rule out WFD pursing a dual-listing structure in the years ahead.

The other thing I wouldn’t rule out is WFD becoming and M&A target itself. That M&A would target the development pipeline which is arguably undervalued in the current WFD share price.

WFD stated they want to build the company size up by +50% in the next 5-7 years. That would appear an achievable goal taking into consideration the project pipeline.

In a world where genuine growth is hard to find, if WFD can grow their company size by +50% in the next 5 to 7 years that growth outlook will be re-rated as the equity market becomes more comfortable it will be delivered.

As tends to be the case, the consensus analyst view remains sceptical on WFD as it has all the way up during our high conviction buy campaign pre and post-split.

As we sit here today the BUY/HOLD/SELL ratio is 3/7/5 and the median 12 month price target is $9.69, below the current ex distribution (12.3usc) share price.

Clearly, the forward P/E of 21x has spooked the WFD analysts into consensus caution. However that has been the case since the split with consensus 12 month share price targets (yellow line) chasing the WFD share price +33.3% higher over the period. Frank-

I ended the “Frank-ly you should give a damn” note with “Through time co-investing with the Lowy’s in various Westfield

entities has made our clients a lot of money. It’s been a great ride and one I encourage you to continue.”

Fast forward to today, and despite +$12bil in post-split value creation, my view on co-investing with the Lowy’s remains unchanged. In fact, that reinforces my view.

WFD has a winning formula. It has a globally scalable formula. It is a structural GROWTH stock and completely justifies near-term P/E’s premiums versus growth-less competitors.

Winners keep on winning: The Lowy Family and Westfield (WFD) are winners. I back winners but winners with a macro tailwind are even better.

On that basis I am lifting my 12 -18 month price target on WFD to..

$11.50

However, I must say that if WFD deliver on their vision to grow the company by +50% over the next 5 to 7 years then in probably under 5 years-time WFD will be over..

$15.00

WFD remains an absolutely core member of my high conviction portfolios.

I’ll be in Perth on Thursday then playing in a charity golf event early on Friday in Sydney. Next note on Monday morning, Go Australia, Charlie

04 MAR

THE GREENBACK IS BACK (AGAIN)