SGP
Stockland is the large, mixed residential and commercial property developer.
They are a perfectly fine company, but at the same time, a good demonstration of the cyclical pressures facing REITs and, we think, housing stocks more broadly.
The higher mortgage rates, and plunging consumer confidence, are dramatically impacting new enquiries.
We believe the only “housing-related” stocks set to benefit at this stage are the banks (where we’ve been deploying capital). The next six months should contain a “sweet spot” for earnings, in which NIMs expand, but bad and doubtful debts haven’t started to rise.
We had tried to obtain an exposure through the building products companies (specifically ABC), thinking that the huge backlog in residential construction and generally resilient infrastructure and resources expenditure would lead to decent earnings at attractive valuations.
However, that approach hasn’t worked; all the building products companies (ABC, BLD, CSR, FBU) have sold off dramatically, and ABC and BLD in particular have struggled to offset rising input costs).
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