Growth outlook slows
IT APPEARS that Fountainhead – which featured on a number of stock-picking lists earlier this year – has lost favour among fund managers. The share has been sold down quite aggressively in recent weeks, with its price sliding around 7% since early April. A key concern is the redevelopment of the 48 000sq m Blue Route Mall in Tokai, Cape Town, one of Fountainhead’s top five properties in its R7,76bn property portfolio. The shopping centre faces a R780m overhaul, scheduled to begin in June, which will effectively take the property and its rather substantial income stream out of the market for the next two years, resulting in a significant dilution in income payouts to shareholders.
When interim results were announced on 30 April, management said growth in distributions was expected to slow to 4% for the year to end-September 2010, down from 8,1% in 2009. Earlier this year most analysts were still forecasting Fountainhead’s distribution growth for 2010 to be around 7% to 8%.