Stocks benefit from a more positive outlook |
UK-BASED major shopping mall landlords were arguably the biggest winners on the JSE this week, despite their centres in England not even being properly open yet.
On Friday Hammerson, which has 21 what it calls “flagship destinations”, was up 5.35 percent to R26.18 on the JSE, trading at a price that also represents a 64 percent increase in the price from the Friday previously.
Last month, this share traded at a lowly R9.38, after reportedly being one of the most shorted stocks on the London Stock Exchange. The company plans to re-open its malls next Monday (June 15) in line with guidance from the UK government. Four of its centres in France re-opened in May, and two re-opened in Paris last week.
Of its premium outlets, nine of the 11 outlets were trading and three of them having remained open throughout. Five of nine European retail villages were trading. Seven of eight retail parks have been open for essential trading.
Hammerson’s share price dropped even before the Covid-19 pandemic, due to rising debt and structural changes in retail in Europe which has seen the growth of online shopping.
During the lockdowns of the Covid-19 pandemic, many landlords struggled to get rent from tenants that were forced by their governments to close, and in the three months to end March, Hammerson received only 37 percent of UK rental billings. The company also cancelled its dividend.
It reported a 4.2 percent fall in likefor-like rental income last year and a 5.9 percent decline in estimated rental values (ERV), an acceleration of the 0.9 percent ERV reduction recorded in 2018.
The deteriorating position of tenants and uncertainty around property valuations has also made further disposals – the main way of lowering debt – more difficult, although, at the end of 2019, Hammerson said property values would need to drop 28 percent for it to breach covenants on unsecured loans.
intu Properties, which also owns major shopping centres in the UK, was trading 7.14 percent higher at R2.10 on the JSE on Friday morning, representing a 68 percent increase over a week. Friday’s price:earnings ratio was at 35.46 points, quite high considering the still unclear outlook as far the group.
Last week intu said it expected to collect rents and service charges of £310m (R6.59 billion) for the year to
December 31, about a third less than the £491.6m collected in the same period last year.
Before the Covid-19 pandemic, intu reported a £2bn loss for the year to December 31. In May it also warned that it was likely to breach its debt commitments and debt standstills were being sought from lenders.
Also gaining strongly in the past week has been Tsogo-Sun Hotels. Many hotels in the country have opened from the beginning of this month in line with level 3 of the lockdown that allows business travel.
Tsogo-Sun was trading 15.09 percent higher on Friday morning at R2.67 per share, a level that represented a 78 percent gain from the R1.50 that it was trading the previous Friday. Last week Tsogo reported that headline earnings fell 31 percent to R278m in the year to March 31, 2020. But the interest cover ratio was high at 12.2 times, while the cash holding was sitting at a very healthy R722m versus R212m the year before, which indicates it has more than enough balance sheet strength to see the group through the extended lockdown.
The group’s entire portfolio in South Africa, Africa and the Seychelles has been deactivated, with the exception of those hotels that had been designated as quarantine facilities or as accommodation for essential service providers, or people awaiting repatriation.
Investec’s share price was up 5.63 percent to R37.92 by Friday lunchtime, bringing its gain over a week to a tidy 26 percent, which represents strong growth for a bank in the current weak economic environment in South Africa. For purposes of comparison, the JSE’s bank index barely moved over a week.
Investec’s headline earnings per share came to 46.5 pence for the year to March 31, down 23.6 percent from the year before. Predictions for 2021 are around 42p.
It will likely be a tough year for investment banking, with the likelihood of more muted client activity, elevated impairments and lower interest income due to low interest rates, as well as protracted economic recoveries.
It’s hard to fathom what made the share price rise in the past week, but globally, stocks have benefited from a more positive outlook for the Covid-19 pandemic as more and more countries begin to lift restrictions. Asset manager Allan Gray even pushed its shareholding to just over 10 percent last week.
Standard Bank’s share price was up 0.46 percent at R112.72 on Friday after Midday, which brought its gain over a week to nearly 11 percent. The price earnings ratio is only around 6. The biggest bank in Africa warned last week that earnings for the 6 months to June 30 were expected to be more than 20 percent lower than in the comparative period.
Nevertheless, it remained well positioned to weather the Covid-19 storm, with the liquidity coverage ratio for the 3 months to March 31 at 142 percent, well above the regulatory requirement of 100 percent.