Value on offer as clouds of concern begin to clear
Dipula Income Fund’s B shares are still undervalued despite jumping 4% in the week following the release of a better-than-expected set of results for the year ending August. The counter’s share price has no doubt also been buoyed by market talk that a takeover by Arrowhead Properties seems increasingly unlikely.
Dipula, one of only a handful of substantially black-owned and managed property stocks on the JSE, didn’t live up to expectations on the capital growth front this year. Its R5.4bn portfolio has a 55% bias to retail property and includes a number of malls that cater to lower-income shoppers in rural areas and townships. The share price of both A and B units has seemingly been weighed down by the uncertainty around a potential takeover by Arrowhead, which acquired 22% of Dipula’s B units in March and recently raised its stake to 24.5%. Arrowhead chief executive Gerald Leissner and chief operating officer Mark Kaplan have made no bones about their intention to pursue a full takeover of Dipula.
The fund’s relatively high concentration of empty office space, mostly older B-grade buildings, has also been an issue. However, some headway has been made to address these concerns. While the office sector remains weak (23% of the portfolio’s value), with a vacancy level of 18.7%, a number of lettings were concluded after year-end in problem areas like Bruma, Randburg and Midrand, bringing the fund’s current office vacancy closer to 14%. Leasing