Rebosis talks of mystery deal to help cut its debt

Rebosis Property Fund continues to provide its investors with more questions than answers.

The company, led by founder and CEO Sisa Ngebulana, on Tuesday released financial results for the six months to end-February in which it said it was confident it would cut its worrying debt through the help of a mysterious deal.

In April, Rebosis announced it was in talks with local and offshore investors about a deal which could change its corporate structure. No details were given. Ngebulana says these talks were for a deal meant to reduce its debt.

Rebosis’ loan-to-value (LTV) stands at 72.2%. LTV measures a property fund’s debt relative to the value of its asset portfolio.

The company, which owns a mix of shopping malls and offices that are mostly leased to the government, managed to reduce its debt to R9.5bn from R9.6bn in the six months to endFebruary. Its properties are valued at R13.1bn. Rebosis’s LTV is then a staggering number given that fund managers believe LTVs should be below 40% with the more risk-adverse among them wanting LTVs to be close to 30%.

Ngebulana says the mooted deal will bring the company’s LTV below 40% by the time it releases results for the year to end-August. But investors still do not know what the deal will entail. Will Rebosis sell its flagship assets including Baywest Mall in Gqeberha, Hemingways in East London and Forest Hill in Centurion?

The company needs to win back credibility. Its shares plummeted into the low cents in the past three to four years and have not shown any sign of recovery.

It said on Tuesday that a dispute had been resolved after the acquisition of the Baywest and Forest Hill shopping centres in 2016. The once-off liability for resolving the dispute cost it R175m. This is quite cheeky considering the assets were bought from the Billion Group, a developer that Ngebulana also heads.

FOOD PRICES GOING UP

Consumers better get ready for rising food costs in the next few months. The monthly cost of a basket of food commodities has reached its highest level since May 2014, the UN’s Food and Agricultural Organization says.

The organisation’s April figures combine the dollar-based costs of sugar, oils, meat, dairy products and cereals and show a 30% increase in food prices year on year. April’s spike marked the 11th consecutive monthly rise in the value of the index.

The rising costs of basic foods can be a double-edged sword for SA grocery retailers, who try to shield consumers from inflation. More positively, as groceries cost more, retailers need to sell fewer items to make the same revenue as the year before. And with large food distribution centres, some retailers can store dry food in advance and benefit from higher profits as prices rise.

Investors should expect more pressure on the profit margins of listed food producers such as Astral and Tiger Brands, who also face double-digit electricity increases.

Libstar, a food producer of private label brands for Checkers, Pick n Pay and Woolworths, said it would be hard hit by rising input costs in 2021 and warned that retailers would squeeze food producers to slash costs and profit margins.

Consumers and food producers should buckle down for a tough few months.