US strip malls will not be enough for Resilient
Investors are eager to discover how Resilient Reit will better use resources it had allocated for an African expansion that has been put on ice because of low economic growth and restrictive economic policies.
The company wanted to build a slew of shopping centres in Nigeria in a joint operation with retail group Shoprite. But experts on the ground in Nigeria could not justify spending money in Africa’s most populous country while the state there continued with antibusiness policies.
“We have been unable to spend the money which we’ve raised in Nigeria. The … policies related to currency control are not conducive to investing for us,” said MD Des de Beer.
Market commentators have speculated that North America would be a good fit for Resilient given that it is already exposed to western and eastern Europe and that Australia is highly priced at present.
De Beer has said before that he was working on a deal on a continent where Resilient had not had a significant presence in the past.
The questions are now about how Resilient would make a foray into the US, which has one of the oldest and most developed listed real estate markets.
Resilient has in the past bought shares in massive real estate investment trusts (Reits), including Simon Property Group, General Growth Properties and Canada’s RioCan Reit. But to compete in enormous real estate markets like those of the US and Canada, Resilient will need to buy dominant shopping centres directly. Owning dominant malls — as opposed to strip malls and convenience centres — has proved fruitful for Resilient for years.
Last week the company announced it had grown its dividend per share 16.2% in the six months to December 2016 compared with the same period a year before. This is far better than competing Reits, which are expected to increase their income payouts between 7.5% and 8% on average.
There is no massive mainstream market interest in niche telecommunications specialist Huge Group. But the company’s share price is up more than 60% over the past 12 months, with a few small-cap investors clearly enthusiastic about longer-term prospects.
This week Huge completed the placement of 48.8-million new shares at 615c per share to raise a not insubstantial R300m. Participants must be delighted, what with Huge’s shares now hovering near 750c on the JSE.
It needed only about R124m to fund the cash portion due in the recent Connectnet Broadband Wireless acquisition.
Huge probably anticipated raising a little more than the R124m needed but was presumably taken aback when demand was significant enough to raise more than double that amount. This is a reassuring position for Huge, which is likely to pursue further acquisitions to build a compelling bouquet of specialist telecoms services.
In fact, the last interim report said Huge had for years been constrained by financial and legal challenges as well as by the size of its balance sheet and the lack of capital to grow organically. But directors said this would change if Huge raised “optimum capital”.
Should there be an opportunity to swoop on a sizeable acquisition, Huge might be better advised to pursue an accelerated book build. If the ducks are quacking, feed them.