Value on of­fer as clouds of con­cern be­gin to clear

Financial Mail - Investors Monthly - - Analysis -

Dip­ula In­come Fund’s B shares are still un­der­val­ued de­spite jumping 4% in the week fol­low­ing the re­lease of a bet­ter-than-ex­pected set of re­sults for the year end­ing Au­gust. The counter’s share price has no doubt also been buoyed by mar­ket talk that a takeover by Ar­row­head Prop­er­ties seems in­creas­ingly un­likely.

Dip­ula, one of only a hand­ful of sub­stan­tially black-owned and man­aged prop­erty stocks on the JSE, didn’t live up to ex­pec­ta­tions on the cap­i­tal growth front this year. Its R5.4bn port­fo­lio has a 55% bias to re­tail prop­erty and in­cludes a num­ber of malls that cater to lower-in­come shop­pers in ru­ral ar­eas and town­ships. The share price of both A and B units has seem­ingly been weighed down by the un­cer­tainty around a po­ten­tial takeover by Ar­row­head, which ac­quired 22% of Dip­ula’s B units in March and re­cently raised its stake to 24.5%. Ar­row­head chief ex­ec­u­tive Ger­ald Leiss­ner and chief op­er­at­ing of­fi­cer Mark Ka­plan have made no bones about their in­ten­tion to pur­sue a full takeover of Dip­ula.

The fund’s rel­a­tively high con­cen­tra­tion of empty of­fice space, mostly older B-grade build­ings, has also been an is­sue. How­ever, some head­way has been made to ad­dress th­ese con­cerns. While the of­fice sec­tor re­mains weak (23% of the port­fo­lio’s value), with a vacancy level of 18.7%, a num­ber of let­tings were con­cluded after year-end in prob­lem ar­eas like Bruma, Rand­burg and Midrand, bring­ing the fund’s cur­rent of­fice vacancy closer to 14%. Leas­ing

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