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Thoughts on CHC and REITS

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Thoughts on CHC and REITS

Dear James and Team, My mother always told me it was rude to brag, however, I think she would forgive me this time. I have been with MM for about 18 months now and since joining my returns have consistently been improving. My returns for this FY have been my best ever. So a huge thank you to the MM team. Now my question. On Thursday you discussed four property related stocks. Based on analyst valuations CHC seems to have some good upside (approx. +30%). I would appreciate your reasoning on why you did not include CHC as one of the property stocks under review and by extension are not that fond of it? Keep up the great work, Charles


Thanks Charles, great to hear about solid returns and that we’re doing our part to help. That’s what we’re all about at MM!

Firstly, we do think Charter Hall (CHC) is a solid operator, we’re not negative on it, we just have a preference for others for various reasons.  CHC generates it’s earnings from 2 main areas.  Funds management which is reoccurring, and development which is more transactional in nature. Sort of like the difference between a Fund Manager and a Stockbroker. Fund managers are more highly valued than a transactional stockbroker whose revenue will be more impacted by market conditions.

If we strip out the transactional style earnings,  CHC is trading on around 18x and on UBS estimates, will grow that part of the business at ~8% in FY24. That’s slightly cheap relative to history, but not materially so. From a relative sense, we like Dexus (DXS), Centuria (CNI), Goodman (GMG) & National Storage (NSR) more at this juncture, but stress, we are not negative on CHC, more just neutral.

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Charter Hall Group (CHC)
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