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Vukile positive on dividend growth
Vukile positive on dividend growth
Published Date: 2019-12-03 | Source: Stephen Gunnion | Author: Stephen Gunnion
The real estate investment trust now generates close to half its earnings from Spain, where it is well placed to deliver sustainable returns.
Vukile Property Fund says it's on track to grow its dividend by 3-5% this year thanks to the benefits its getting from geographic and macroeconomic diversification.
The real estate investment trust (REIT) now generates 47% of earnings in Spain after increasing its stake in subsidiary Castellana to 82.5%. Castellana buys, manages and leases real estate assets, shopping centres and other retail properties in Spain. Vukile listed it on the Spanish Stock Exchange's junior bourse, Mercado Alternativo Bursatil, in July 2018.
At the halfway stage, Vukile increased its interim dividend by 3.5% to 80.84c per share. Total revenue for the six months to end-September rose 50% to R1.8 billion, while net income increased by 6.1% on a like-for-like basis as its cost-to-income ratio was contained at 16.9% of all expenses. Headline earnings grew 26% to 82.99c and profit available for distribution rose 19% to R847 million. At the end of September, its net asset value equated to R20 per share, down from R20.26 in March.
In Spain, its investment property increased by 12% to €1.03 billion, boosted by the acquisition of Puerta Europa Mall for €56.8 million and additional units of retailer El Corte Ingles for €37 million. Vacancies fell to 1.4% and it maintained a rent collection rate of over 99%.
SA retail vacancies reduced to 2.8% over the six months, with 82% retail tenant retention and a 3.5% improvement in trading density. Trading density measures sales turnover per rentable square metre and is used as an indicator of how profitable a shopping centre is.
Its total portfolio was worth R32.9 billion at the end of the period, up 7.9% from March, including properties in SA, Namibia and Spain. The value of investments in listed groups Atlantic Leaf Properties, Fairvest and Arrowhead declined by 12% to R2.3 billion. Last month, it boosted its SA portfolio with the R516.5 million acquisition of Mdantsane Shopping Centre from Rebosis Property Fund.
In Southern Africa, the fund said full-year like-for-like growth was likely to be in line with the first half of the year. It also expected to gain more traction in decreasing vacancies across its portfolio. While further pressure on escalations and lease duration was expected to persist, it said it was well positioned with low vacancies and reduced exposure to high-risk tenants. It welcomed the slowdown in new shopping centres being built around the country, saying that dominant A grade malls should continue to show growth over time as the market consolidated into these sites due to slowing supply.
In Spain, Castellana's retail portfolio was well placed to deliver sustainable returns. The group's strategy was to keep growing the portfolio organically and through value-added asset management initiatives and accretive acquisitions. However, after years of strong growth, the Spanish economy is starting to cool, with the International Monetary Fund predicting growth of 2.2% this year and less than 2% next year.
Its shares rose 2.5% to R20.19 yesterday.
Vukile's share price is trading close to its NAV of R20 (which is down from the prior period). This is madness, given the poor outlook for SA and the modest outlook for Spain. Expect a correction over the next 12-18 months.-- Dave Hazelwood (@hazelwood_dave) December 2, 2019
The shift in strategy and focus by Vukile was a smart move, considering the climate economically. I wish certain listed companies would've had the foresight as they did, maybe just maybe, some would be still trading profitably.-- Sizwe Phungwayo (@Sizwe_Phungwayo) December 2, 2019