Focus on improving local portfolio
Redefine offers exposure to both the international and local market and is taking advantage of the increasing demand for student housing.
redefine Properties is one of South Africa’s largest listed property companies, with retail, commercial and industrial properties. It also owns significant stakes in Redefine International, Australia’s Cromwell and Poland’s Echo Polska Properties, giving it international exposure.
People generally invest in property funds because listed property is a suitable alternative to owning physical property – it eliminates the stress of doing rental collections, negotiating leases as well as maintenance work. Redefine’s major assets include Centurion Mall and East Rand Mall in Gauteng, and the N1 City Mall and Kenilworth Centre in the Western Cape.
While the fundamentals for the property sector have softened, listed property still offers good regular income-generating ability and positive long-term capital growth prospects. The listed property asset class has, over the past 10 years, outperformed South African cash, equities and bonds. Redefine’s shares are among the most actively traded on the JSE, making it a highly liquid single entry point for gaining exposure to both quality domestic properties and a spread of multiple international commercial real estate markets, according to the company.
On the downside, Redefine International said earlier it would pay a lower proportion of its income as dividends, following pressure from its UK shareholders, who are seeking capital growth, Business Day reported in March. This means Redefine will receive lower investment income from Redefine International, in which it owns a stake of about 30%. Uncertainty over Brexit in particular has weighed on UK property investments.
Locally, the company is taking advantage of the increasing demand in the student housing market. Redefine is converting its office complexes Yale Village in Parktown and Hatfield Square into student residences. It acquired a stake in student housing developer Respublica Student Living for R438.6m, in which it has a 51% shareholding. By the end of 2017 Redefine intends supplying around 10 000 student beds in SA, and is also diversifying into student accommodation in Australia.
Redefine, though maintaining its primary bull trend, has been rangebound between 1 270c/share and 805c/share since May 2012. Currently trading on the bullish end of its sideways pattern, Redefine would have to breach its all-time high to escape its long-term consolidation. However, with Brexit uncertainty, currency volatility and the low growth environment, this non-direction is likely to persist.
Redefine will also focus immensely on improving its local portfolio through development, including expansion and improvements at the Centurion, Benmore, Kenilworth and South Coast malls. They are also in the process of developing the Rosebank Link near the Gautrain station and are looking into specific expansion in the industrial logistics sector.
How to trade it:
Go long: Upside through 1 175c/ share would end its medium-term bear trend formed within its huge consolidation pattern. Gains to the all-time high at 1 270c/share could then ensue. However, Redefine may reach a ceiling at that level. If not, increase positions above that level as the company would abandon its long-term sideways pattern, and commence a new bull phase with upside potential to 1 735c/share. Go short: Downside through 1 060c/share would extend the current bear trend towards 990c/ share. Failure to hold there could see Redefine retract further to the 805c/share key support mark.