Res­i­den­tial as­sets to pro­vide growth

Financial Mail - Investors Monthly - - Analysis - Alis­tair An­der­son

Oc­todec In­vest­ments is a R6bn mar­ket cap­i­tal­i­sa­tion fund that owns a sub­stan­tial number of high­qual­ity res­i­den­tial as­sets, many in Jo­han­nes­burg and Pre­to­ria’s in­ner cities, and Kil­lar­ney Mall in Jo­han­nes­burg.

The group’s largest as­set is The Fields, a re­tail as­set with a value of R776.7m in Hat­field, Pre­to­ria. It in­cludes a ho­tel, shops, of­fices, flats and park­ing.

Kil­lar­ney Mall, the sec­ond- largest as­set, is worth R641.0m. It has been an un­der­per­former but may be po­si­tioned to im­prove. Rose­bank, a sub­urb next to Kil­lar­ney, is booming, and this should have pos­i­tive knock-on ef­fects for Kil­lar­ney.

Oc­todec also owns var­i­ous high-qual­ity res­i­den­tial units.

MD Jef­frey Wap­nick ex­pects much of his com­pany’s fu­ture suc­cess to come from these res­i­den­tial as­sets.

“De­mand for res­i­den­tial units priced from about R4,000 to R7,000 is grow­ing steadily,” he says. “More and more mid­dle-class peo­ple want to live in or close to our cities. I be­lieve this is the sweet spot for Oc­todec’s res­i­den­tial port­fo­lio.”

Wap­nick also says Oc­todec is look­ing at deals at the coast for the first time. It could in­vest in hous­ing a level above af­ford­able hous­ing, which is in de­mand in the Western Cape.

In its most re­cent set of re­sults for the six months to Fe­bru­ary, Oc­todec re­ported 6.5% growth in div­i­dends. These grew to 104.8c/share, com­pared with 98.4c in the pre­vi­ous cor­re­spond­ing pe­riod.

Wap­nick says the res­i­den­tial port­fo­lio showed lower growth in like-for-like rental in­come at 3.8%. He at­tributes this to lower es­ca­la­tions of rentals in Pre­to­ria. The ra­tio of net prop­erty ex­penses to rental in­come re­mained un­changed at 29.6%. Like-for-like rental in­come in­creased 5.5%.

Va­can­cies in the port­fo­lio, com­pris­ing 316 prop­er­ties val­ued at R12.7bn, in­creased to 16.8%, from 15.6% in Au­gust. Core va­can­cies, which ex­clude the gross let­table area of prop­er­ties held for de­vel­op­ment and those that were un­der rede­vel­op­ment, in­creased to 10.1%, from 9.8% in Au­gust.

Over the past five years, Oc­todec’s share price has grown 42.84%.

Oc­todec is fo­cused on SA and does not med­dle in off­shore mar­kets. “We in­vest in what we un­der­stand and we man­age as­sets and ten­ants in a man­ner which works for us,” says Wap­nick

Oc­todec in­vestors should ex­pect share price ap­pre­ci­a­tion in the com­ing months, while the com­pany main­tains div­i­dend pay­outs of 6%-7%.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.