SCA Property on the hunt for more bargains

SCA Property on the hunt for more bargains

The coronavirus may have eaten a hole in its revenue, but convenience shopping centre owner SCA Property Group (ASX: SCP) has flagged a bullish desire to snap up more assets in the coming months.

The Sydney-based group holds a portfolio of 85 Woolworths- and Coles-anchored neighbourhood shopping centres with a mix of convenience-focused speciality stores.

In a statement to the ASX the group said collection rates were going better than previously predicted, with receivables collected up almost 50 per cent on prior estimates.

As at 30 June 2020, the company only expected to recoup $7 million of $22.3 million in receivables and had factored in a credit loss provision of $15.3 million.

However, it managed to collect $10.4 million by the end of the September quarter.

While SCA conceded it was unlikely its cash collection rates would return to pre-COVID levels until state governments relaxed leasing codes of conduct across the country, it set a wolfish tone when it came to future buys.

"On 30 September 2020 we completed the acquisition of Bakewell NT for $33 million (excluding transaction costs) representing an implied fully let yield of 7.2 per cent," the group said.

"While cap rates for neighbourhood centres have compressed, we continue to assess a number of acquisition opportunities and remain confident of completing more acquisitions during FY21."

Management highlighted a strengthened balance sheet, including around $340 million in undrawn debt and no debt until December 2022.

As at the end of FY20 the group had a warchest of $622.8 million including cash and undrawn debt at its disposal to increase its footprint in a tight marketplace. 

The group also flagged an optimistic sales growth forecast, stating sales growth was bouncing back outside Victoria as government restrictions eased and the trend toward customers shopping locally continued.

"There are now only three specialty tenant categories experiencing sales declines compared to the same period last year, which are apparel, cafes/restaurants and hairdressing/beauty," he said.

"Nationally, 92 per cent of our tenants (by number) are open and trading, with 60 per cent open and trading in Victoria and 99 per cent open and trading in the rest of Australia."

The outfit not only intends to buy more companies, but it will also be giving more distributions to shareholders, to the tune of 5.7 cents per unit (cpu) in the first half of FY20, up 3.6 per cent on the previous 5.5cpu.

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