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.

Finweek English Edition - - MARKETPLACE KILLER TRADE - Ed­i­to­rial@fin­ Mox­ima Gama has been rated as one of the top five tech­ni­cal an­a­lysts in South Africa. She has been a tech­ni­cal an­a­lyst for 10 years, work­ing for BJM, Noah Fi­nan­cial In­no­va­tion and for Stan­dard Bank as part of the re­search team in t

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.

Tech­ni­cal anal­y­sis:

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.

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