Telkom a ‘buy’ on value of property

Telkom’s mooted unbundling of its vast property portfolio makes the network operator a “buy”, a prominent asset manager says.

Telkom’s mooted unbundling of its vast property portfolio makes the network operator a “buy” ,a prominent asset manager says.

Telkom CEO Sipho Maseko told Business Day in November 2018 the company would consider spinning off its property assets, which have an insured value of R24bn, as a “mega” real estate investment trust.

The group’s Gyro subsidiary manages Telkom’s portfolio of 1,332 properties, including offices, client service centres, residential dwellings and land parcels. It has earmarked 40 properties for development, including housing projects.

Maseko said at the time that “if you look at Telkom’s valuation, the property value is not reflected in our share price”.

Cannon Asset Managers CEO Adrian Saville said in a note on Monday he expected Gyro’s portfolio to be separately listed within the next 12 months.

“This spinoff would represent a substantial capital recognition for shareholders, releasing R45 in property assets to add to the current market price of R64,” Saville said.

The network operator’s shares were 0.5% higher at R68.93 on Monday morning, giving it a market capitalisation of R35bn. The company was trading at a price-earnings ratio of 10.5 with a 5.6% dividend yield, Saville said. “Telkom displays utility-like attributes in terms of performance, with a return on assets of 9.2% per annum and return on equity of 11.7% per annum. This makes for a reasonable investment.”

Saville also recommended JSE-listed investment holding company Sabvest as a “buy”. He said the global equity selloff in 2018 meant valuations were now more attractive.