Option Trade - Simon Property Group (SPG)
Friday August 03, 2012

SPG -- Top Growth –Top Profit!!

**OPTION TRADE: Buy the SPG Oct 2012 165.000 call (SPG121020C00165000) at or under $3.00, good for the day. Place a protective stop limit at $1.20 and a pre-determined sell at $4.50.

by Ian Harvey

August 03, 2012


Headquartered in Indianapolis, Indiana, Simon Property Group Inc. (NYSE: SPG) is the largest publicly traded retail real estate company in North America, engaged in acquiring, owning and leasing a diverse portfolio of shopping malls. The company currently owns or has ownership interests in 336 properties spanning 244 million square feet of gross leasable space in North America, Europe, and Asia. The company presently has a market cap of $48.6 billion.

Simon Property Group Inc. has been on a long-term uptrend since mid-2010 and is currently trading near its 52-week high of $160.48. This retail REIT (real estate investment trust) is benefiting from strengthening fundamentals for commercial real estate. SPG has also benefited from strong cash flows and pursues a policy of increasing dividends, with a current yield of 2.6%.

Strong Second Quarter

Simon Property Group reported strong second quarter results on July 24, which included a 14.1% year-over-year growth in total revenues to approximately $1.2 billion. Comparable sales in the regional malls and premium outlet centers combined portfolio increased 9.9% to $554 per square foot. Average rent per square foot in the combined portfolio increased 3.7% during the quarter to $39.99.

FFO came in at $1.89 per share, surpassing Consensus Estimates by 5.0% and the year-ago FFO by 14.5%. Occupancy in the combined portfolio remained relatively high at 94.2%.

Outlook Raised

With solid quarterly results, Simon Property increased its FFO guidance for the full year 2012 to between $7.60 and $7.70 per share from its earlier projection of $7.50 to $7.60.

Over the past seven days, the Consensus Estimates for 2012 increased 1.6% to $7.73, which is above the upper end of the company's guidance range. This implies a year-over-year growth of 12.2%. For 2013, the Consensus Estimates have increased 1.7% to $7.97 over the same time period, representing a year-over-year growth of 3.1%.

Premium Valuation

Simon Property's valuation metrics are at a premium on a price-to-earnings (P/E) and price-to-sales (P/S) basis. Shares of Simon Property are currently trading at a forward P/E of 20.76 xs versus the peer group average of 18.88 xs. On a P/S basis, the shares are trading at 10.68 xs versus 7.65 xs for the peer group average. A healthy earnings growth prospect warrants the premium valuation of the company.


Since October 11, 2011, Simon Property shares have consistently fared better than the simple moving average for 200 days or SMA (200). In addition, the stock has outperformed the S&P 500 index since April 15, 2011. The year-to-date return for the stock is noteworthy at 24.46% compared to an S&P 500 tally of 10.21%.

Barclays recently raised its price target based on fundamental analysis from $180 to $183.


With a favorable supply/demand relationship, rising earnings estimates, robust growth projections, and a healthy dividend yield, Simon Property offers an enticing upside potential going forward. In addition, a continued focus on some of the premium markets bodes well for its long-term growth.

The Trade

Yesterday saw the shares drop to a level that helps with an acceptable entry level….therefore, based on this fact and those detailed above the following options trade is recommended…..

**OPTION TRADE: Buy the SPG Oct 2012 165.000 call (SPG121020C00165000) at or under $3.00, good for the day. Place a protective stop limit at $1.20 and a pre-determined sell at $4.50.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.

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