The Scentre Group (ASX: SCG) share price has lost almost 30% of its value over the past year, with coronavirus restrictions curbing various social activities, including physical shopping, across Australia.
However, with the rollout of an effective vaccine now possibly only months away, can the Scentre share price rebound to its pre-COVID levels in 2021?
A recap of what happened to Scentre Group in 2020
Scentre Group was created in mid-2014 when the Australian assets of the Westfield Group and those of the Westfield Retail Trust were combined.
It owns a portfolio of all the 42 Westfield shopping centres across Australia, among other retail assets.
The company is predominantly a passive rent collector, and hence a real estate investment trust (REIT) share, though it does also undertake new development activities.
With government restrictions seeing many of Scentre’s tenants shut up shop periodically during the first half of 2020, the company faced reduced rent collection levels during this time. As restrictions began easing, however, Scentre reported improvements in trading conditions. For the 10 months of trading ending 31 October the company advised it had collected $1,621 million of rent, an increase of $746 million since 30 June 2020.
Customer visits during the September 2020 quarter were 90% of the same time the previous year (excluding Victoria).
Portfolio occupancy was also at a surprisingly high 98.4% at the end of September 2020.
What of the prospects for the Scentre share price in 2021?
Given 90% of its shopping centre consumers, outside of Victoria, had returned by September 2020, the company believes that once the vaccine rollout is complete, it can roughly return to pre-coronavirus trading conditions.
Also, according to Scentre Group, it owns many properties among the most strategic retail locations in Australia, which are integrated with major transport hubs. As such, the company hopes it can maintain full occupancy across all its centres in 2021.
However, Scentre Group has acknowledged it is facing rather stiff competition from online retailers.
To this end, Scentre is attempting to evolve in response to this competition by shifting to categories less exposed to online players. For example, it has tried to increase the mix of its food retail tenants as well as boosting its entertainment and service categories.
Notwithstanding this, Scentre has reported that restaurants typically involve comparatively short leases and costly fit-outs. Furthermore, they are generally unable to command the premium rental rates that high-margin fashion and electronics retailers usually do.
Scentre also faces the challenge of attempting to continue its recovery as government stimulus payments are phased out, which could possibly put some of its tenants under renewed pressure.
Foolish takeaway
As mentioned, the Scentre share price has lost more than 28% of its value over the past twelve months. The share price plummeted to as low as $1.35, its 52-week low, back in March last year.
Since then, however, it has partially recovered and is currently trading at $2.80, up a little over 1% for the day so far.
The REIT has announced its intention, subject to unforeseen circumstances, to pay a distribution in early 2021.
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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
The post What’s in store for the Scentre (ASX:SCG) share price in 2021? appeared first on The Motley Fool Australia.
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