Hyprop: Adopting a contrarian approach
As a blue-chip property stock, Hyprop’s portfolio is worth about R25bn − holding properties like the Rosebank Mall, Hyde Park Shopping Centre and Clearwater Mall in Johannesburg. In 2014, it acquired Somerset Mall in Somerset West, and it has stakes in malls in Ghana and Zambia.
The company has enjoyed sustainable upside over the past few years. Hyprop, the third-largest property counter, has reported good results consistently – becoming the favourite share for many property punters. Also, regional malls have been outperforming other commercial property, even in down economic cycles.
Entering the market in other African countries proved to be a lucrative investment for Hyprop, making it the most liquid − if not the only − real estate investment trust that provides investors with exposure to large existing malls in Sub-Saharan Africa. Hyprop’s initial plan was to increase its African allocation from R750m to R3bn over the next five years from last year, a move that is already paying off well.
In a report t it led Africa’s Pulse, published last October, the World Bank stated that “despite weaker-thanexpected global growth and stable or declining commodity prices, African economies continue to expand at a moderately rapid pace, with regional GDP growth projected to strengthen to 5.2% yearly in 2015/16 from 4.6% in 2014”.
It also expects signif icant public investment in infrastructure, increased agricultural production and expanding services in African retail, telecoms, transportation and finance, to continue to boost growth in the region. This prediction will bode well for Hyprop, which already has a substantial foot in the door.
Last year alone, Hyprop received dividends of R4.8m and R30.3m from its investments in Atterbury Africa and African Land, respectively. With the future looking bright for Hyprop, it expects dividend growth of between 10% and 12% for the full year to June 2015. This definitely makes the share a buy and hold – for investors to simply enjoy distributions from some of the best shopping centres in the country, while participating in its successful intention to conquer the rest of Africa.
However, if I was asked if this is the time to buy Hyprop, I would suggest not. Though many analysts regrettably called it a sell last year, only to retract and cheer on the upside, I believe Hyprop has done its run, and is very expensive at current prices. My usual response when the mass is optimistic, but the monthly chart is overextended, is to sell!
Although Hyprop has potential to extend its gains to around the 12 000c/share levels – it could positively breakout of a symmetrical triangle on the daily chart – I believe this could be a rapid move that could lose steam and trigger a consolidation. Hyprop is extremely overbought on the monthly chart, and has extended the third and final phase of its primary bull trend, which simply spells caution. Alarms bells should sound below 9 940c/share. Hyprop could retest previous support levels – potentially towards the second support trendline – if that phase decides to give in.
Hyprop will surge f urther and the relative strength index (RSI) would remain overextended. The steeper the trend becomes, the greater the risk of a sharp and rapid reversal.