RETAIL landlord Westfield has felt the brunt of investor disappointment after it unveiled a lower distribution forecast yesterday for the current year, leading analysts to ponder an earnings downgrade.
Fuelling the market disappointment was Westfield's weaker distribution forecast of 64¢ per security for the 2010 year to December 31. That compared with 94¢ in the 2009 year, which was reported yesterday.
The fall was due to Westfield's well-flagged decision to drop its distribution payout from earnings to 70-75 per cent so it can retain funds for future developments.
But a resurgence in developments and stable conditions in Australia will help to offset the anticipated weak to flat performances of the US and British business, which account for more than 60 per cent of revenue.
Westfield was also forced to bat away questions as to its future involvement in any third-party breakup of the US-based General Growth Properties, which is the subject of a recent hostile $US10 billion ($A11.1 billion) takeover bid from Simon Property.
Westfield joint managing director Peter Lowy declined to comment on whether Westfield would be an interested party. But he did confirm international sovereign funds were back in the property markets with a focus on retail assets, making acquisitions very competitive.
''As we always say, we do not comment on market speculation and the Simon bid has only just been made,'' Mr Lowy said.
Westfield said that, after a flat 2010, new developments, the opening of stage one of the $1.2 billion Pitt Street Mall in Sydney and a forecast resurgence in consumer spending would lead to a better 2011. It also announced it would no longer continue to hedge its net foreign-denominated earnings.
Analysts said movements in currency will now have an impact on earnings, thereby increasing volatility, albeit moderately.
Westfield reported a net loss of $458 million for the full year to December 31, 2009, which was much improved on the $2.2 billion loss in 2008. The latest result included a downwards property revaluation of $3.5 billion.
Mr Lowy said the change to the payout ratio and cessation of hedging for its net foreign-denominated earnings made a forecast pointless at the start of the year.
However, analysts at Goldman Sachs JBWere said the lower payout ratio implied operational earnings were 85.3¢ to 91.4¢ per share, which is about 7.1 per cent down on 2009.
''This shows the continued uncertainty in earnings … Our operational earnings forecast is 91.8¢ a share, just above the high end of the implied range,'' the broker said.
Westfield shares closed down 17¢ at $11.75.
