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Westfield Group

By Dan Stratful (AFA)

Tuesday 17th July 2012

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Westfield Group (ASX: WDC) is one of the world's largest listed retail property groups operating one of the world's largest shopping centre portfolios. Its high quality portfolio of 118 shopping centres across Australia, the United States, the United Kingdom, New Zealand and Brazil, is valued at $61.7 billion with almost 24,300 retailers.

WDC operates a vertically integrated business model and in December 2010 it spun off half of its Australia and New Zealand assets into the separately listed Westfield Retail Trust.

Owning shopping centres in a globally subdued retail environment sounds like a bad idea, however investors need not worry about WDC's financial position or gearing levels which are not particularly high at 32%.

WDC saw comparable shopping centre net property income growth of 3.5% in the year to 31 December 2011 (FY11) which helped it to achieve a 37% increase in net profit to $1.5 billion, as the global portfolio occupancy remained high at 97.5% leased, with the Australian and New Zealand portfolios at over 99.5% occupancy.

During the year, WDC continued the expansion of its online strategy including the use of internet, mobile and social media with a focus on driving shopping centre sales, through the online marketing of its tenant retailers. This strategy is used to combat the perceived long term decline and switch from bricks and mortar shopping to Internet shopping.

WDC forecasts an increase in its distributions for FY12 to 49.5 cents per security, providing a medium/low income yield by NZ standards. Analysts' are mixed on WDC's outlook with their recommendations spanning the entire spectrum - ranging from buy-hold-sell.

NZ Investors might like to consider listed property options closer to home, which provide a higher yield and a more favorable tax treatment of distributions.

Status: REDUCE

WDC shares today traded at $9.81

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