The largest U.S. mall owner Simon Property Group (SPG, Financial) reported its final quarter numbers of 2014 on January 30, and the report card looked clean and promising leading to the stock showing an upsurge after the earnings release. The Indianapolis-based company also announced a dividend program to pacify nervous investors and does look promising as a stock to hold on a long term horizon. Let’s quickly have a glance at the quarter highlights and the outlook portrayed by the company for the coming fiscal year to judge whether the stock is a profitable proposition to invest in at this juncture.
Glancing at the quarter highlights
According to the statement given by CEO, David Simon, “We had a very strong fourth quarter concluding an exceptional year… We produced strong financial and operating results in the fourth quarter, led by growth in comparable net operating income and record year-end occupancy.”
Revenue was flat at $1.3 billion but the company reported earnings of $405 million at the end of quarter as on December 31 or $1.30 a share, leaving past the previous profit count of $381.6 million or $1.23 a share in the same period of 2013. The net income posted for the quarter missed the Thomson Reuters’ analyst consensus by $0.02 a share, though the revenue matched their forecast.
Fund from operations improved 12.3% to $896.7 million or $2.47 a share, which is a closely watched profitability measurement for real-estate investment trusts reflecting the ability of the firm to generate cash. In fact, the FFO per share was in line with the analyst expectations and was majorly impacted by the growth in comparable net operating income and occupancy rates hike.
Simon Property Group Inc. claims that U.S. malls occupancy as of December 31 was 97.1% leaving past the figure 96.1% received a year earlier, which indicates that the base minimum rent per square foot increased 11% to $47.01 per square foot and total sales per square foot grew 6.4% to $619. In fact, the real estate investment trust has clearly benefitted from its recent quarter from higher occupancy rates as its chief focus is on bigger malls and outlets.
Keeping at par with the company policies, Simon has increased its quarterly dividend by $0.10 a share, to $1.40 per share which would be payable on February 27 to the shareholders. This dividend hike marks a sequential rise of 7.7% and a 12% increase when compared on a year-over-year basis.
Outlook is firm and promising
Based on the high occupancy rates and rents reported in its December quarter, the company has portrayed an optimistic outlook going forward. For the 2015 fiscal year, the management havs projected earnings to be in the range of $5.05-$5.15 per share. However, analysts are taking a cautious stand and have forecasted earnings to be about $5.01 a share for the coming fiscal year.
It further forecasts the 2015 FFO per share to be in the range of $9.60-$9.70 a share, while Zacks analysts have estimated it to touch about $9.78 a share in the coming fiscal year.
Final call
Simon has been engaged in a string of acquisitions that obviously helped the REIT to record better results in the final quarter of the past year. The company has modest plans of further investing $2.5 billion in its premium outlets to support a global development pipeline of 6.4 million square feet.
What safeguards Simon from the market diabolism and helps post a consistent decent performance is the strong focus on premium assets aligned with diversified exposure to retail assets across the U.S. However, the performance in the near term may face some headwinds linked from the huge expenses associated with the recent acquisition and development activities. But that should not worry investors as the company knows well how to generate enough cash to keep its investor community delighted.
