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SA's Listed property sector gains from better than expected results


AFTER Resilient Property Income Fund and New Europe Property Investments (NEPI) last week reported better than expected results South Africa’s listed property sector gained 1.3% during the week ended February 8.

To the delight of investors Resilient reported distribution growth of 10.8% for the year ended December 2012, which was slightly above market expectations.

Management’s guidance for this year’s results would also have pleased investors as it expects distributions to grow 1% this year, despite the less than favourable economic prospects. Resilient’s last year’s results were helped by an increase in turnover rental, the strong performance from property company New Europe Property Investments (Nepi) and a reduction in borrowing costs.

The full year sterling results performance was achieved mainly due to the strong performance of Resilient’s property portfolio. Turnover rentals received increased from R16.4 million to R22.1 million which reflects increasing trading densities being achieved.

This bodes well for rental escalations in the future. Resilient continued to benefit from the reduction in the cost of borrowings as a result of the expiring interest rate swaps being replaced by new interest rate swaps at lower rates.

The group’s equity investments also performed ahead of budget, particularly the investment in New Europe Property Investments plc (Nepi) where the rand depreciated against the Euro from the budgeted rate of R10.00. Resilient does not hedge its currency exposure.

SA Commercial Prop News noted the best performing malls were Brits Mall, Diamond Pavilion, The Grove, Village Mall Kathu and Mall of the North, all of which achieved significant growth in foot-count and increases in trading densities.

Brits Mall and Mall of the North are relatively new centres and have continued to establish dominance in their markets. But Tzaneng Mall and Jabulani Mall achieved limited growth.

Tzaneng Mall was affected by the increased dominance of Mall of the North and similarly Jabulani Mall by the opening of Protea Glen, a new mall in Soweto.

Resilient has committed R600m to an African joint venture with Standard Bank and Shoprite Checkers, and Resilient Africa has entered into memoranda of understanding with five Nigerian landowners.

NEPI’s results for the year ended December 2012 were equally pleasing for investors, with management declaring a final distribution of 12.05 euro cents for 2012. Distributions for the year as a whole increased by 15% in euros and most analysts expect a similar level of distribution growth in each of the next three years.

Nepi share price increased 3.5% last week, on the back of the results announcement, while Resilient’s share price gained just 0.8% despite the company’s pleasing numbers.

Grindrod Asset Management chief investment officer Ian Anderson says the market is now turning its attention to Growthpoint and Hyprop, with both companies expected to report later this month.

He says Hyprop is expected to deliver distribution growth of 7% for the year ended December 2012, while Growthpoint’s interim results are expected to show the company is on track to deliver distribution growth of 6.5% for the year ended June 2013.

“The forward yield on the sector has declined marginally to 6.7%, but there are still a number of smaller listed property companies offering forward yields in excess of 8%,” Anderson says.

Top performers for the week ended February 8 were Synergy A with its share price gaining 9.09%, Nepi 3.54%, Premium 3.475, Hyprop 2.84% and Vunani 2.56%. The bottom five performers were Redefine International with a -0.38%, Fortress B -0.67%, Sycom -0.84%, Hospitality A -1.17%, and Octodec -2.52%.

The SA Listed Property Index recorded a total return of 0.36% in December 2012. The Property Loan Stock Index and Property Unit Trust Index recorded returns of 0.85% and -0.15% respectively over the same period.

Capital Markets firmed during the month with the yield to maturity on the long term government bond index ending the month at 6.76% from 7.04% at the end of November. The historic yield of the sector ended the month at 6.56% from 6.51%.