Fo­cus on high-growth ar­eas still pay­ing off

Financial Mail - Investors Monthly - - Analysis - Joan Muller

There’s hardly a fund man­ager who doesn’t have MAS Real Es­tate on their stock-pick list.

The rand-hedge prop­erty play’s pop­u­lar­ity has no doubt been driven by its stel­lar 30% div­i­dend growth, re­ported this month for the year end­ing June, and the 91% growth in its in­come-gen­er­at­ing as­set base.

The market likes the shift in fo­cus from the UK and Ger­many to devel­op­ment op­por­tu­ni­ties in Cen­tral and East­ern Euro­pean (CEE) coun­tries.

MAS’s CEE foray will be led by Prime Kap­i­tal, founded by Martin Slab­bert and Vic­tor Semionov, ex-direc­tors of Ro­ma­nia-fo­cused New Europe Prop­erty In­vest­ments, now known as Nepi Rock­cas­tle.

The joint ven­ture with Prime Kap­i­tal has no doubt placed MAS on the radars of in­vestors who may not have pre­vi­ously taken an in­ter­est . Slab­bert and Semionov have built a track record in Ro­ma­nia and neigh­bour­ing coun­tries where they have been de­vel­op­ing and man­ag­ing shop­ping cen­tres for more than a decade.

MAS’s share price is up nearly 43% over the past 12 months. This month, it tested a high of R26.54 fol­low­ing the re­lease of im­pres­sive re­sults for the year end­ing June. So if in­vestors haven’t yet bought MAS shares, have they missed the boat? It doesn’t ap­pear so. Lil­iane Barnard, CEO and port­fo­lio man­ager at Me­tope In­vest­ment Man­agers, says MAS is one of their top three prop­erty picks de­spite the strong run in the share price.

She notes that fu­ture re­turns will be sup­ported by MAS’s strat­egy to dis­pose of ma­ture as­sets in the UK and Ger­many and re­cy­cle the cap­i­tal into higher yield­ing devel­op­ment prospects in the CEE re­gion.

Keillen Ndlovu, head of listed prop­erty funds at Stan­lib, says it’s not too late to buy MAS shares. “The com­pany has a strong man­age­ment team with a proven abil­ity to un­lock value for share­hold­ers. MAS is on track to con­tinue to de­liver div­i­dend growth of 30%/year for at least the next two years, which is at­trac­tive given the more muted dis­tri­bu­tion growth num­bers ex­pected from SA-fo­cused prop­erty companies.”

At the MAS re­sults pre­sen­ta­tion in Sand­ton this month, CEO Lukas Nakos said though a num­ber of SA prop­erty play­ers are ex­pand­ing their port­fo­lios into the CEE re­gion, MAS’s tie-up with Prime Kap­i­tal gives it a com­pet­i­tive edge. He noted that most other in­vestors in the re­gion are sim­ply buy­ing ex­ist­ing as­sets and col­lect­ing rent.

“Prime Kap­i­tal, on the other hand, has the spe­cial­ist skills to de­velop new shop­ping cen­tres from scratch at at­trac­tive yields and to re­de­velop un­der­per­form­ing ones.”

Since MAS an­nounced its en­try into the CEE re­gion via the Prime Kap­i­tal part­ner­ship about a year ago, the com­pany has bought three malls: Nova Park (32,600m2) in Gor­zow, Poland; and Gal­le­ria Bur­gas (37,500 m2) and Gal­le­ria Stara Zagora (21,300m2), in Bul­garia.

In ad­di­tion, MAS is tar­get­ing a devel­op­ment pipe­line in the re­gion worth €865m. The lat­ter in­cludes 11 value cen­tres across Ro­ma­nia, with ei­ther Car­refour or Kau­fland as the food an­chor, as well as two su­per-regional malls, the one be­ing part of an 80,000m2 mixed-use devel­op­ment in Slove­nia, and the other a rede­vel­op­ment of a 50,000m2 cen­tre in Iasi, Ro­ma­nia’s sec­ond­largest city after Bucharest.

MAS is also look­ing to cash in on the huge hous­ing short­age in Ro­ma­nia. It has ac­quired land for two large-scale de­vel­op­ments in Bucharest that will de­liver 930 res­i­den­tial units.

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