Octodec shares rally after result announcement

MD of Octodec Investments Limited Jeffrey Wapnick said the company delivered strong growth in distributions of 14,8% for the year representing an income yield of 8,3% with a total return of 11,7%.

Octodec Investments’ linked unit price rallied 6.8% in early trade on Wednesday after the company reported 14.8% increase in its distribution to 157.6c per linked unit for the 12 months ended August 2013.

The interim distribution was 78.7c per linked unit with a final distribution of 78.9c per unit.

The group invests primarily in the retail, industrial and office property sectors, with exposure to residential property, mainly in the Pretoria and Johannesburg CBD’s.

During the period, the company also attained REIT status effective from 1 September 2013.

Commenting on the results, Jeffrey Wapnick, Managing Director said; “Octodec delivered strong growth in distributions of 14,8% for the year representing an income yield of 8,3% with a total return of 11,7%."

Its net asset value grew 18.7% to R22.33 per unit. Rental income and net rental income increased by 10.6% and 7.2% respectively compared with the previous year.

The group is considering a number of redevelopment opportunities for some existing properties‚ which will enhance the quality of the property portfolio and result in sustainable distributions in the future.

Octodec’s investment in IPS continued to provide strong earnings growth with profits earned from its associate company, excluding fair value gains, increasing 41,4% on the prior year to R24,7 million.

Vacancies in Octodec’s portfolio, including properties held for redevelopment, amounted to 13,6% of total lettable area with core vacancies at 8,4%.

The performance of Killarney Mall, the company's flagship shopping centre, went well with vacancies below 2%. But the company experienced increased vacancies in the office and industrial rental markets due to subdued economic conditions.

Various properties were redeveloped and upgraded during the review period at a total cost of R66.2 million. This includes the completed upgrades of the mixed-use residential property Kerk Street located in the Johannesburg CBD and a 5 233 m² retail development located in the Pretoria CBD, which is occupied by Cambridge, which is part of the Walmart Group, and other retailers.

The company acquired a portfolio of properties for an aggregate purchase consideration of R140.5 million which consists of offices that are located in well-established office nodes of Persequor Park, Menlyn and Centurion, Pretoria. Additionally the Eloff Ext Mini Units property was disposed of for an amount of R6,65 million.

The fund also reported an increased loan to value ratio as at 31 August 2013 of 35,9% of the total value of its investment portfolio. Interest rates in respect of 54,9% of borrowings have been hedged, maturing at various dates ranging from November 2013 to October 2018. The average weighted interest rate of all borrowings is 8,4% per annum, with unutilised banking facilities in excess of R90,3 million.

“Looking forward, growth in the local economy is expected to remain subdued. Notwithstanding the environment, and barring unforeseen events, current indications are that the percentage growth rate in distributions per linked unit for the next financial year should be in line with the sector average,” Wapnick concluded.

The Wapnick family are the architects behind Octodec as well as sister companies Premium Properties, which is listed on JSE, and IPS.