Founder re­turns in bid to re­vive group

Financial Mail - Investors Monthly - - Analysis - Alis­tair An­der­son

Re­bo­sis, which listed in 2011, was the most highly black-man­aged and held prop­erty com­pany on the JSE for a num­ber of years.

But the group is strug­gling, try­ing to sell down its of­fice port­fo­lio to re­duce debt and hav­ing to slash its up­com­ing div­i­dend pay­out.

It was estab­lished by the Bil­lion Prop­erty Group in 2010 and listed in May 2011. Since the list­ing Bil­lion has de­vel­oped a num­ber of as­sets and then sold them to Re­bo­sis. It was also Re­bo­sis’s prop­erty and as­set man­ager un­til these func­tions were in­ter­nalised.

At the time of list­ing, Rebo- sis’s prop­erty port­fo­lio was val­ued at R3.3bn. The group now owns R19bn worth of as­sets.

CEO and founder Sisa Nge­bu­lana is try­ing to ce­ment the com­pany’s strat­egy as be­ing fore­most a re­tail prop­erty owner.

This shift be­gan about two years ago when Nge­bu­lana de­cided he needed to di­vest from of­fices and a num­ber of sov­er­eign un­der­pinned as­sets.

But this has proved more dif­fi­cult than ex­pected and the group is tak­ing longer than it wanted to dis­pose of se­lected of­fices in 2018. It needs to sell of­fices to re­duce debt.

Re­bo­sis has tar­geted get­ting its debt or loan-to-value level to 32.7% by the end of De­cem­ber. At the end of Fe­bru­ary, when it last re­ported fi­nan­cial re­sults, its loan to value was 48.3%. In No­vem­ber it will re­lease fi­nan­cial re­sults for the year to Au­gust.

About 50.5% of its to­tal port­fo­lio is of­fice and close to 50% is re­tail. About 1% is in­dus­trial.

Nge­bu­lana wants his fund’s port­fo­lio to be 80% re­tail and 20% of­fice in a few years.

He re­turned to his CEO role af­ter his suc­ces­sor, Andile Mazwai, sud­denly left in April. Mazwai had wanted Re­bo­sis to own a mix of prop­erty types and did not agree that it needed a heavy bias to­ward re­tail.

Nge­bu­lana, an East­ern Cape real es­tate en­tre­pre­neur, had wanted to re­tire from Re­bo­sis and de­velop in that prov­ince. But he’s now en­trusted with turn­ing Re­bo­sis around.

Things have re­mained dif­fi­cult since his re­turn.

Re­bo­sis said it would cut the div­i­dend for the six months to Au­gust by as much as a quar­ter com­pared with a year ear­lier, cit­ing the neg­a­tive ef­fects of once-off ac­count­ing items on its in­come.

Re­bo­sis has a dual cap­i­tal struc­ture with A and B shares which suits in­vestors with dif­fer­ent risk pro­files. Re­bo­sis A share­hold­ers are guar­an­teed dis­tri­bu­tion growth of 5% and are paid first. B share­hold­ers are paid the resid­ual.

The div­i­dend-cut an­nounce­ment saw Re­bo­sis’s B share price plunge 6.8%.

The com­pany ad­vised that the div­i­dend per Re­bo­sis B share for the six-month pe­riod to Au­gust 2018 was ex­pected to be 50.66c-54.04c, between 20% and 25% lower than the 67.55c for the com­par­a­tive six months ended Au­gust 31 2017.

Nge­bu­lana said Re­bo­sis had iden­ti­fied “once-off items” that were hold­ing the fund back from achiev­ing its po­ten­tial.

Re­bo­sis would ac­count for these items at once, in­stead of over time, and in this way re­move “some un­cer­tainty from the stock”. It could then to re­turn to pos­i­tive div­i­dend growth soon af­ter.

Re­bo­sis’ B share is down nearly 34% year to date.

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