Money&investing

ly defensive.

“Location has become absolutely key to attract and retain office tenants. We are seeing a flight to quality, so we’re confident that our office portfolio is well positioned to benefit from the next upward cycle.”

However, König says the extent to which office demand, vacancies and rentals will recover to pre-Covid levels will depend largely on the pace of the vaccination rollout. “Mobility will only increase when the vaccination programme gains momentum, meaning more people going out to work, shop and play.”

König believes increased mobility will quickly translate into higher confidence and, ultimately, more demand for space.

Though he concedes that office vacancies can rise further over the next six to 12 months if more corporate tenants adopt remote working policies, König says anecdotal evidence suggests there’s been a U-turn in sentiment in recent months.

Many CEOs have seemingly realised that working from home is not all it’s made out to be, he says. And more workers have trickled back to the office as schools have reopened.

Besides, König reckons a 100% work-fromhome model is not sustainable as it doesn’t promote and nurture employee wellbeing, corporate culture and collaboration. “Young people wanting to learn and be mentored are suffering the most,” he says. He expects most companies to adopt a hybrid model — with an element of working from home interwoven with an

BIG DADDY NO LONGER

Redefine vs SA Listed Property index – weekly Based to 100 office presence.

As a result, Redefine has no intention of selling out of the office market. But the group is keen to jettison older properties, or repurpose them.

Redefine had to sell about R4bn of assets in the six months to February, including its R2.8bn stake in a student housing development in Australia.

König argues that these disposals have gone a long way to streamline Redefine’s business platform and helped to improve its loan-to-value (LTV) ratio — a key indicator of balance sheet risk — from 47.5% to 44.3% in the six months to February.

But some analysts reckon the drop in LTV is negligible, at best. And they’re worried that the company’s office values don’t fully reflect the glut of stock out there.

Shareholders who were expecting the company to resume interim dividend payments have also had their hopes dashed.

As Keillen Ndlovu, Stanlib’s head of listed property, puts it: “It would have been nice to get a dividend from Redefine, especially after not paying anything last year.”

Though the intention is still to pay a dividend, Redefine’s board has deferred its decision to November, when results for the full year to

August will be reported.

König says: “The jury is still out on when the turnaround will begin. Until then, weaker property fundamentals and low economic growth have to be factored in for 2021 and beyond.”

Redefine’s share price dropped 4% earlier this week and though the stock has nearly doubled over the past six months, it’s still trading at a discount to NAV of just more than 40%, versus the sector’s average 30%.

Ndlovu ascribes the price recovery not quite living up to expectations due to Redefine’s restructuring taking longer than expected.

“Redefine’s business has been very diversified and complex over the years and some investments did not bear the expected fruit.”

But he says there is good potential upside in the share price if management continues to execute the restructure successfully and further lower LTV levels.

Ridwaan Loonat, equity analyst at Nedbank CIB, has a similar view. He says management did well to bring down gearing and improve liquidity. “But the company will need to do more to ease investor concerns.”

Mobility will only increase when the vaccination programme gains momentum, meaning more people going out to work, shop and play

Andrew König

production from its new Quellaveco copper mine in Peru, which, said Cutifani, “will boost our supply of one of the modern world’s mostneeded energy-transition metals”.

Then there’s Anglo’s Woodsmith crop nutrients project in the UK, acquired last year.

These projects, said Cutifani, “all take us further down that road — being a producer of highquality products in favourable markets that are also fundamental to decarbonisation and the demands of a growing global consumer population, from food and everyday essentials to luxury. This is a very differentiated business.”

Tsatsi says Anglo’s commodity mix — thanks to the surging prices — means that it “has the ability to move its balance sheet to a net cash position over time or to get more aggressive in returning cash to shareholders”.

Hochreiter says the possibility is “sky-high dividends” for shareholders in the year ahead, while Bloomberg Intelligence believes there is scope for a special dividend.

For one, Anglo American could receive $2bn in dividends from Anglo Platinum — of which it owns 78.5% — which would go towards paying down its $5.6bn debt. Once the debt is paid, Anglo will likely want to build up a kitty of R20bn or so before it looks at acquisitions and growth, Hochreiter says.

Deutsche Bank rates Anglo as one of its top picks in the European mining industry, while of the 21 analysts who cover the stock, 12 maintain a buy recommendation on it.

Commodity prices like these won’t last forever, but they may continue for a while, especially given US President Joe Biden’s infrastructure build.

Hochreiter ’s own models suggest that PGM supply, for example, will be in deficit for the next 10 to 20 years.

“It will end, I’m pretty sure. But in the middle of last decade the story was lower prices for longer.

“Now suddenly, after one year of strong prices, we’re saying: ‘Where’s it going to end?’ Well, it was down for 10 years, maybe it’ll go up for 10 years … it might be stronger for longer this time.” x

The platinum and palladium exposure that Anglo has makes it unique. No-one else has that

Wayne McCurrie