Stockland (ASX: SGP) Securing Substantial Member Returns: Locking in a 67.84% Gain Since Our Initial $3.70 Recommendation

Key Takeaways: We’ve decided to take profit on Stockland (ASX: SGP), locking in a 67.84% return for our members since our initial buy at $3.70 per share, reflecting both the strong gains already realised and the disciplined execution by management. The hybrid portfolio continues to impress, with recurring-income assets like Town Centres, Logistics, and Workplace contributing 60% of earnings, complemented by high-margin development activities such as Master Planned and Land Lease Communities making up the remaining 40%. FY25 results underline this balance: Funds from Operations rose 2.8% to $808 million, with FFO per security at 33.9 cents, while development earnings grew 11.6%, supported by a $16 billion pipeline. Looking ahead, FY26 FFO is guided to 36.5 cents per security, implying 7.7% growth, with a prudent FFO payout ratio of 68.9% and a reliable distribution of 25.2 cents per security. The balance sheet remains solid, with gearing at 25.2%, interest cover at 4.2x, and $2.9 billion in liquidity, underpinning both financial flexibility and the company’s investment-grade rating. Against these fundamentals, the current market pricing fully reflects Stockland’s strengths, making this a timely and disciplined moment to realise gains while maintaining confidence in its long-term growth story. --- We have decided to take profit on Stockland, securing a 67.84% return for our members since our initial buy recommendation at $3.70 per share. This move reflects the substantial value already realised. Despite market volatility, Stockland has delivered strong results across residential, retail, and logistics, allowing members to confidently lock in gains while retaining exposure to Australia’s structural property growth. Capturing profits now also allows us to manage risk prudently and preserve capital for future opportunities. With certain segments, such as retail, sensitive to interest rates and evolving consumer behaviour, realising gains helps mitigate potential headwinds. Meanwhile, Stockland’s disciplined development pipeline continues to create value, positioning members to benefit from resilient, long-term growth sectors. In short, this decision balances reward and caution, ensuring members capitalise on success while staying strategically aligned with the property market fundamentals. A Hybrid Portfolio Strategically Positioned to Balance Stability and High-Growth Opportunities Across Australia’s Key Property Sectors Stockland remains a leading diversified property group on the ASX, operating as a stapled entity. Its operations are deliberately structured to balance risk and growth: a stable, recurring-income Investment Management portfolio, including Town Centres, Logistics, and Workplace assets, complements a higher-return Development portfolio, spanning Master Planned Communities (MPC) and Land Lease Communities (LLC). Management targets approximately 60% of earnings from stable recurring activities and 40% from high-margin development, providing resilience, flexibility, and support for investment-grade credit ratings (A-/A3). The company is well positioned to benefit from Australia’s long-term demographic and economic tailwinds, including sustained population growth and a booming e-commerce logistics sector, with assets strategically located in high-demand residential corridors and critical national infrastructure hubs. FY25 Results Demonstrate the Strength of a Well-Balanced Strategy and the Effectiveness of Monetising Extensive Development Pipelines For the full year ended June 30, 2025, Funds from Operations (FFO) reached $808 million, up 2.8% on the prior year, yielding FFO per security of 33.9 cents. Development segments were the standout, delivering 11.6% year-on-year FFO growth, reflecting the effective monetisation of Stockland’s extensive land banks. The Investment Management portfolio also contributed 3.0% FFO growth, supported by positive re-leasing spreads and valuation gains. Looking ahead, management targets FY26 FFO per security of up to 37.0 cents, with a midpoint of 36.5 cents, implying a 7.7% growth rate, supported by a development pipeline valued at over $16 billion. Disciplined Capital Management and Strategic Retention Ensure Sustainable Growth and Reinforce the Case for Realising Gains Stockland’s revised FFO payout ratio of 60%-80% for FY26 (down from 75%-85%) highlights a disciplined approach to capital management, recycling earnings into high-return projects while limiting reliance on external funding. Alongside the 11.6% surge in high-margin development earnings, this confirms that the investment thesis is delivering value as intended. With the market having largely priced in the confirmed fundamentals and the strategic focus on capital retention, prudence now dictates capturing accumulated gains. TAKE PROFIT is therefore recommended, recognising both the realised value for members and Stockland’s strong confirmed outlook for the year ahead.

The Australian property market remains underpinned by structural tailwinds that continue to support Stockland’s dual-focused strategy. Residential markets, driven by persistent supply shortages, are expected to deliver 4.0% price growth in 2025, reinforcing the demand for SGP’s Master Planned Communities (MPC) offerings. Meanwhile, the logistics sector benefits from the secular acceleration of e-commerce, sustaining demand for strategically located distribution and warehouse assets. SGP’s hybrid model, balancing recurring rental income, which contributes 60% of earnings, with high-return property development, accounting for the remaining 40%, positions the group to monetise these macro trends efficiently. This alignment between industry dynamics and corporate strategy substantiates the continued relevance of the investment thesis while highlighting the structural support for both revenue stability and development upside. Company Earnings, Profitability, and Margins: Key Figures Demonstrating Robust FFO Growth and a Highly Secure Dividend Stream - Adjusted Funds From Operations (AFFO) growth of 5.1% in the previous fiscal year – reflecting improved operational efficiency and margin management. - Forecast FY26 FFO growth of 7.7% – based on midpoint guidance of 36.5 cents per security, indicating strong forward earnings potential. - FFO payout ratio maintained at 68.9% for FY26 – balancing secure dividend distributions with retained earnings to fund the $16 billion development pipeline. - Distribution per security set at 25.2 cents – ensuring investors continue to receive a reliable income stream while the company reinvests in high-return projects. Balance Sheet and Cash Flows: Key Financial Metrics Underscoring Conservative Gearing and Strong Liquidity to Support Strategic Flexibility - Gearing ratio at 25.2% – comfortably within the target range of 20%–30%, maintaining prudent leverage. - Interest Cover Ratio (ICR) of 4.2x – reflecting the company’s ability to service debt comfortably. - Forecast FFO-to-debt ratio of 16.0% in FY26 – supporting the maintenance of the ‘A-’ investment-grade credit rating. - Liquidity buffer of approximately $2.9 billion – ensuring sufficient funding for large-scale development commitments without financial stress. Valuation: Premium P/FFO Multiple Justified by Structural Growth and Capital Discipline Our 12-month target price of $6.30 is derived from a forward Price-to-FFO multiple of 17.3x applied to FY26 FFO guidance. While a long-term DCF suggests intrinsic value closer to $7.92, near-term technical ceilings and the current earnings cycle warrant focusing on a shorter-term exit. Comparative analysis with peer A-REITs confirms that this multiple premium is supported by SGP’s structurally advantaged growth profile and disciplined capital management, making the proposed TAKE PROFIT level both rational and timely. Technically, SGP is in a neutral consolidation phase, with immediate resistance clusters around $6.25. The $6.30 target is strategically positioned to coincide with these levels, balancing market momentum with valuation considerations. The alignment of technical resistance and fundamental valuation strengthens the rationale for realising capital gains at this juncture. In the near term, we see elevated risks of a potential correction, suggesting that investors should exercise caution. We believe a TAKE PROFIT rating is warranted for Stockland at $6.30. The company’s structural growth prospects, solid earnings, and strong balance sheet remain intact, yet market pricing now fully reflects these strengths. Implementing this disciplined exit allows investors to realise accrued gains, while leaving the door open to re-enter once the stock demonstrates a confirmed consolidation or resumes clear upside potential.