Nepi’s share price expected to recover

East European property group Nepi Rockcastle’s share price, which has been battered so far in 2018, should recover in the coming months because it owns some of the best-run shopping centres in central and eastern Europe.

The strategy of owning mostly direct property, including dominant malls, and not being a hybrid fund has been a major success so far, according to co-CEO Spiro Noussis.

He said the company offered a simple investment case.

The group, which has a market capitalisation of about R63bn, has assets made up 90% by direct property and 10% by listed securities. By the end of the December 2018 financial year, it will be close to owning direct property only.

“We are a bricks and mortar property company that happens to own a large number of shopping centres across eight countries in central and eastern Europe,” Noussis said.

He hoped that the share price would soon stabilise given that his management team had delivered strong income returns to shareholders.

Nepi Rockcastle suffered from a prolonged sell-off in shares in 2018 as people left the firm because of its relationship with Resilient. Some critics have also said Nepi Rockcastle was trading at a premium to net asset value that could not be justified.

Its share price closed 0.46% lower at R108.50 on Tuesday.

The company was launched by former directors of the Resilient group.

Nepi Rockcastle does not own shares in Resilient or in any companies associated with Resilient. Resilient owns shares in Nepi Rockcastle. Nepi Rockcastle grew its distribution per share 17.10% in the year to December, in line with guidance.

The total value of the direct property portfolio owned and managed by Nepi Rockcastle, including joint ventures, was in excess of €5bn (R72.54bn) for the first time.

Peter Clark, a portfolio manager at Investec Asset Management, said Nepi Rockcastle produced a decent set of results, which came out in the wake of recent negative market sentiment and share-price pressure. Most of its assets were invested in physical assets, he said.