Solid foun­da­tion for fu­ture growth

Finweek English Edition - - COMPANIES & MARKETS -

VUK­ILE’S FO­CUS ON prop­er­ties in lower in­come and sec­ondary ar­eas may well give it a low rat­ing on the ex­cite­ment charts. How­ever, the stock has proved to be one of the listed prop­erty sec­tor’s most con­sis­tent per­form­ers. Dis­tri­bu­tion growth of 10,2% for the year to 31 March 2010 places it among only a hand­ful of real es­tate funds still achiev­ing dou­ble-digit growth in in­come pay­outs. The counter has de­liv­ered an equally im­pres­sive share price per­for­mance, with growth of more than 30% over the 12 months to end-March: that’s way ahead of the prop­erty loan stock in­dex’s rise of 16% over the same time.

Man­age­ment as­cribes the com­pany’s strong set of re­sults to good con­trol of bad debts, keep­ing a lid on va­can­cies and strong rental growth in some sec­tors. Cost con­trol is also an on­go­ing pri­or­ity. Says chair­man An­ton Botha: “The com­pany will con­tinue its rig­or­ous pur­suit of cost con­trol, ten­ant re­ten­tion, credit con­trol and en­ergy sav­ings while en­hanc­ing the de­sir­abil­ity of its prop­erty port­fo­lio through ren­o­va­tion and ex­pan­sion of its ex­ist­ing build­ings and the ac­qui­si­tion of good qual­ity prop­er­ties.”

Man­age­ment has al­ready de­liv­ered on its ac­qui­si­tion prom­ises, with a deal cur­rently on the ta­ble to buy nine prop­er­ties from San­lam Life for R531m. This trans­ac­tion, which is ex­pected to be fi­nalised by endJuly, will push the value of Vuk­ile’s prop­erty port­fo­lio to more than R5,4bn and sig­nif­i­cantly boost in­come streams.

The port­fo­lio could be bulked up fur­ther over the next year or two as man­age­ment has the op­tion to ac­quire prop­er­ties worth an­other R500m from San­lam, as well as the on­go­ing right of first re­fusal over the re­main­der of San­lam’s multi-bil­lion rand prop­erty port­fo­lio. Vuk­ile has a long-stand­ing re­la­tion­ship with San­lam, as the lat­ter con­trib­uted a sig­nif­i­cant share of Vuk­ile’s start-up port­fo­lio be­fore the fund was listed on the JSE in June 2004.

It ap­pears Vuk­ile’s re­tail prop­erty port­fo­lio – which con­trib­utes 55% of its rental in­come – has weath­ered the down­turn ex­cep­tion­ally well. In fact, Vuk­ile’s shop- ping cen­tre port­fo­lio has emerged un­scathed from the re­tail sales slump on the back of South Africa’s first re­ces­sion in 17 years. Its an­nual re­port shows re­tail va­can­cies have been con­tained be­low 4%, while rentals were still grow­ing at a healthy 10% in the year to end-March.

Vuk­ile’s flag­ship cen­tres in­clude the Phoenix Plaza (Dur­ban), Rand­burg Square (old San­lam Cen­tre), Dob­sonville Shop­ping Cen­tre (Soweto), Davey­ton Shop­ping Cen­tre (East Rand) and the Hill­fox Power Cen­tre (Rood­e­poort).

Look­ing ahead, Botha ex­pects trad­ing con­di­tions to re­main sta­ble in its cur­rent fi­nan­cial year with­out any real fire­works over the short term. “As the prop­erty mar­ket tra­di­tion­ally lags the broader econ­omy by 12 to 18 months, we don’t ex­pect to see a sub­stan­tial im­prove­ment in trad­ing con­di­tions be­fore 2011.

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