Smaller listed property stocks buck the trend
Listed property has had a dismal few months, judging by the overall performance of the South African Listed Property index (Sapy), which has recorded a -18% total return year to date. But not every real estate punter has lost money on the JSE in 2018.
The Sapy has been dragged down primarily by the hefty losses in the Resilient stable of shares, with Resilient Reit, Fortress Reit, Nepi Rockcastle and Greenbay Properties down 40% to 60% in the year to date.
Other rand hedges including MAS Real Estate and Intu Properties have been sold down aggressively due to a stronger rand or lingering concerns about how Brexit will play out.
However, the loss recorded by the index perhaps masks the stellar performance of smaller, South African-focused property stocks. Counters that have delivered double-digit returns so far in 2018 include Fairvest Property, which owns shopping centres that cater to lowerincome shoppers, Emira Property Fund, which has made strides in improving the quality of its office portfolio, Fourways Mall owner Accelerate Property Fund, Western Cape-biased Ingenuity, Octodec Investments and Indluplace Properties.
Analysts believe South African-focused property firms may well continue to outperform their offshore counterparts over the coming months, particularly if the initial positive sentiment created by SA’s new political leadership gains traction.
Dan Matjila, CEO of the Public Investment Corporation (PIC), has told Parliament’s standing committee on finance that he cannot disclose any details of the exit strategy for the Independent Media Group because it involves market-sensitive information.
Matjila was responding to questions from David Maynier, the DA’s shadow minister for finance. Matjila’s statement has a familiar ring to it.
It was almost exactly what he told the MPs in October 2017.
Maynier had asked Matjila if Sagarmatha was intended to be the PIC’s exit strategy. Sagarmatha Technologies was the “unicorn” linked to Iqbal Surve’s Sekunjalo group that did not manage to get a JSE listing in April because of a failure to submit financial statements to the Companies and Intellectual Property Commission.
Maynier’s question reflected market speculation that Sekunjalo would use the proceeds from the listing to repay the PIC for the funds it had provided in 2013 to buy out the former Irish owners of Independent News & Media. The most recently available information on the PIC’s unlisted investments reveals it has an exposure of just more than R1bn to the media firm.
This comprises equity valued at R166m and the remainder in debt, with R408m of that due to be repaid in August. But Sekunjalo does have another option.
African Equity Empowerment Investments (AEEI) CEO Khalid Abdulla told analysts recently about the possible payment of a sizeable special dividend, a hefty chunk of which would go to major shareholder Sekunjalo. AEEI is cash flush after concluding the proposed sale of its 30% stake in BTSA to recently listed Ayo for almost R1bn. Ayo, which is also controlled by Sekunjalo, was able to pay the R1bn after securing a PIC-backed JSE listing in December 2017.