C how it runs…

But some say stock is over­val­ued

Finweek English Edition - - Companies & markets - JOAN MULLER

ing cap­i­tal growth alone. So the big ques­tion is whether there’s any share price up­side left.

Mac­quarie First South Se­cu­ri­ties THE PRICE OF LISTED prop­erty fund ApexHi’s C units are up a stag­ger­ing 245% in six months. Not too shabby a re­turn for in­vestors who bought the stock at list­ing in Oc­to­ber 2006 as a higher­risk al­ter­na­tive to ApexHi’s ex­ist­ing A and B units. C units closed at 280c on list­ing day and touched 690c/share last Wed­nes­day.

What’s been the driver? ApexHi chair­man Marc Wainer says he hon­estly doesn’t know. “It’s crazy… we never ex­pected such phe­nom­e­nal growth in such a short time.”

Wainer says the units are be­ing traded quite ag­gres­sively by hedge funds, which im­me­di­ately “un­der­stood and liked” the struc­ture.

Al­though ApexHi’s three sep­a­rate list­ings – A, B and C shares – all feed off the rental in­come gen­er­ated from one prop­erty port­fo­lio, the C units are re­garded as a riskier bet than the A and B units, as they only start shar­ing in pay­outs once ApexHi’s dis­tri­bu­tion ex­ceeds 300c (280c is ex­pected in the year to end-June).

Un­til that hap­pens in­vestors are chas- prop­erty an­a­lyst Leon Al­li­son says it’s dif­fi­cult to value ApexHi C stock on a shorter-term, yield-rel­a­tive ba­sis as it’s not yet de­liv­er­ing a re­turn and will have a highly geared yield growth profile when they start ac­cru­ing in­come.

But on a longer-term val­u­a­tion the share looks ex­pen­sive. Al­li­son says he’s there­fore cau­tious to rec­om­mend ApexHi C at cur­rent lev­els while much lower risk stocks, such as Growth­point, Emira, Sy­com and Hyprop, still of­fer sig­nif­i­cant up­side.

It seems that some ApexHi C share­hold­ers also re­gard the stock as fully priced, with four of its black em­pow­er­ment share­hold­ers last week de­cid­ing to cash in. Four em­pow­er­ment en­ti­ties sold their re­spec­tive stakes in ApexHi C to two of the re­main­ing em­pow­er­ment part­ners for a tidy profit of R18,7m each (R74,8m col­lec­tively).

The C units were cre­ated partly as a ve­hi­cle to fa­cil­i­tate an em­pow­er­ment deal with­out di­lut­ing in­come for ex­ist­ing ApexHi share­hold­ers. So when ApexHi listed its C units in Oc­to­ber 2006, 30% of the units were sold to em­pow­er­ment part­ners at R2/unit.

Half of those went to the KwaZu­luNatal-based Me­hta fam­ily’s Clearwater Cap­i­tal and the re­main­der to the ApexHi BEE Trust, which is rep­re­sented by five part­ners, four now hav­ing bailed out, leav­ing the 30% em­pow­er­ment stake in the hands of only two en­ti­ties – Clearwater Cap­i­tal and DEC In­vest­ment Hold­ing Com­pany.

Ini­tially, the ex­pec­ta­tion was that the em­pow­er­ment part­ners would only un­lock value five years af­ter list­ing once there had been suf­fi­cient growth. How­ever, ApexHi CEO Ger­ald Leiss­ner says the rapid in­crease in the C unit’s share price has cre­ated the op­por­tu­nity for its em­pow­er­ment part­ners to re­alise the five-year ob­jec­tives within just six months.


Source: I-Net Bridge

Sur­prised by huge de­mand.

Marc Wainer

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