Stockland Firing On All Cylinders

Australia | 12:47 PM

Stockland posted a strong FY25 result and guidance, highlighting growth potential in residential and commercial property, while addressing funding concerns.

-Stockland posts FY25 and FY26 guidance beats
-Master-planned communities growth a highlight in residential
-Data centre partnerships to drive commercial
-Analysts praise a reduced dividend payout

By Greg Peel

Wilsons has released its summation of the August reporting season and subsequent changes to the stockbroker’s Focus Portfolio based on what it labels “the good, the bad and the ugly”. The “good” was added to the portfolio, the ‘bad” had its portfolio weighting reduced, and the “ugly” has been removed.

The “ugly” was James Hardie ((JHX)). The “bad” was CSL ((CSL)). The “good” was Stockland ((SGP)).

Wilsons had previously flagged property developer/manager Stockland as the A-REIT offering the greatest exposure to Australia’s housing market recovery, which was reflected in its strong FY25 result.

In FY25, Stockland generated funds from operations (FFO) up 2.7% year on year, which was slightly ahead of consensus expectations. The highlight of the result was the developer’s master-planned communities (MPC) settlements, which grew 22% year on year to 6870 units, comfortably above guidance of 6200-6700 lots.

Management demonstrated its preference towards organic funding, with the combination of a lower dividend payout ratio (reduced from 75-85% to 60-80%), an active dividend reinvestment plan, and continued capital partnering.

FY26 guidance is for FFO growth of 6-9% year on year, and management flagged it expects MPC settlements of 7500-7800, which at the mid-point is 3% above consensus.

Residential Growth

Citi believes Stockland’s June quarter residential sales number, and the FY25 settlement as well as FY26 settlement guidance, all point to an improved residential environment. With increased first home buyer support to be put in place by January 1, 2026, Stockland is considered well placed to grow residential and land lease earnings strongly.

A key takeaway for Jarden from the FY25 result was an accelerating growth profile with Stockland well positioned at the start of a more supportive residential cycle. This, combined with a strong, and growing, medium-term pipeline, should support ongoing growth in residential developments, Jarden suggests.

The growing contribution from the Lendlease Communities business (which Stockland acquired last November), and growing percentage of developments in the joint venture structure, should improve returns, earnings composition and the risk profile, in Jarden’s view, which makes this a more attractive business throughout the cycle.

Looking ahead, further RBA rate cuts are anticipated, and with first home buyer support to be put in place, Citi believes Stockland’s residential business is well set up to take advantage of the improved residential environment.

Importantly, notes Citi, Stockland is also benefitting positively from its Lendlease acquisition with better than feasibility pricing and volumes being seen this period.

In line with Wilsons’ view, Stockland management pointed to house price and volume growth over the next twelve months across the Eastern Seaboard (NSW, Victoria and Queensland), supported by pent-up demand, interest rate cuts, government incentives supporting first home buyers and tight supply (particularly in NSW and Queensland).

With key forward indicators –-including June quarter sales, enquiries and contracts on hand-– showing positive momentum into FY26, Wilsons expects Stockland to be a material beneficiary of an acceleration in house prices and turnover over the medium-term.