ASX:CHC
Charter Hall Group
Investment Summary
The fund managers believe that Charter Hall Group (CHC) is a best-in-class property funds management business, which has been significantly undervalued, particularly after a decline of 48% from its 2022 peak. In their opinion, the outlook for CHC is optimistic, especially with expectations surrounding the broader property market becoming overly pessimistic. Following a strong FY24 result and better-than-expected FY25 guidance, CHC has shown resilience, with a share price increase of 14.3% in August and a further 10% increase in September. While the bid for Hotel Property Investments suggests potential shifts in real estate fundraising, the fund managers acknowledge CHC's valuation is relatively attractive at 14x EBIT with minimal debt. They recommend monitoring the stock closely, as it could present compelling re-entry points in the future. Overall, the sentiment among the fund managers indicates a cautious optimism about CHC's potential growth.
Commentary From The Managers
Spheria Asset Management
30 Sept 2024
$15.97
- Charter Hall Group’s (CHC.ASX) share price rose 10% during the month.
- Strong performance was noted following the release of FY24 results with FY25 guidance exceeding market forecasts.
- CHC-managed fund CQR and capital partner Hostplus made a bid for Hotel Property Investments (HPI).
- The bid for HPI represents a 10% discount to NTA and is considered unlikely to succeed.
- Success would only result in a +1.5% increase in CHC’s funds under management.
- The bid could indicate an inflection point in the challenging real estate fundraising environment.
- A 50bps reduction in interest rates by the US Federal Reserve further supports positive sentiment.
- While CHC is up over 70% in the past year, it is valued at 14x EBIT with minimal debt.
- CHC is viewed as relatively attractive given the fund’s underweight position in the real estate sub-sector.
Endeavor Asset Management
31 Aug 2024
$14.66
- Endeavor Asset Management bought Charter Hall Group (CHC) in July alongside another real estate business.
- They believe expectations for the broader property market, especially office real estate, are overly pessimistic as interest rates stabilize or decline.
- CHC demonstrated astrong triple positive result: FY24 EPS above guidance and consensus.
- They upgraded FY25 DPS guidance and provided better than expected FY25 EPS guidance of circa79cps, implying~4.2% growth YoY.
- The share price rose14.3% in August due to the results and potential inclusion in the EPRA NAREIT Index.
- Endeavor Asset Management sold into the short-term share price boost.
- They continue to monitor the valuation closely and might re-enter at a more compelling valuation.
Endeavor Asset Management
31 July 2024
$12.68
- Endeavor Asset Management has initiated a new position in Charter Hall Group (CHC)
- The fund manager has been significantly underweight in real estate exposure within the Growth Equities Portfolio
- Current share prices in the sector reflect a significant downturn, with CHC down 48% from the high in 2022
- Endeavor Asset Management believes the outlook for CHC is more optimistic than current valuations indicate
- CHC is regarded as a best-in-class property funds management business
- The fund manager expects earnings to be more resilient than what the market has priced in
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.