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Mid Cap Darlings – Resilient


Mid Cap Darlings – Resilient

Published Date: 2019-06-28 | Source: INCE|Community | Author: Sifiso Skenjana

Mid Cap Darlings – Resilient

Resilient was founded in 2000 and was one of the first property developers to look towards servicing the lower LSM markets with formal retail shopping infrastructure. Radical Economic Transformation in action.

To go to a mall or not to go. Even more, do you suburban kids know anything about Mahikeng Mall in the North West? How about I'langa Mall in Mpumalanga or Arbour Crossing in KwaZulu-Natal? Or if you manage your way through the Mthatha traffic you might have accidentally bumped in a mall called Circus Triangle. Resilient is a little like the PEP / Shoprite of the property market. They have made it their mission to serve previously under-serviced markets from a retail space point of view and have seemingly done a decent job doing so.

Business Model: Resilient invests and develops regional shopping centers with some of the large retail stores as anchor tenants. They also have property in Nigeria and Portugal. Resilient's property portfolio is predominantly split 26.4% in Gauteng, 25.8% in Limpopo and 22.1% in KZN.

Macro Landscape: The retail property sector growth is closely connected to the economic health of the country and its citizens. When people are feeling a squeeze in their wallets they are generally less likely to go to malls, which reduces the revenue of their anchor tenants, which increases the risk of vacancies and on earnings.

Results (Year-end Sept 2018): Keys malls Mahikeng Mall, I'langa Mall and Arbour Crossing achieved interim sales growth of 19.7%, 18.8% and 10.2% respectively. The group has a low vacancy rate of 1.8%, compared to an industry average vacancy rate of 4.4% according to MSCI. This year they also opened a new mall, called Mams Mall. The overall portfolio experienced a 4.7% comparable sales growth which was 1.4% ahead of other shopping centres as a whole.

Growth Prospects: In 2018, the company saw a 60% share price decline upon news that that they might be implicated in share price manipulation. They are working around the clock to get all the matters resolved with the Financial Sector Conduct Authority (FSCA). The share has traded in a relatively flat range while investors await the FSCA outcome. And if that that outcome is positive, you can expect a positive appreciation in the share, as they have continued to resilience and outperformance against their locally listed peers.

If you're a fighter... and resilience is your second name.. then maybe Resilient might be your first share... click here to get exposure to this property.

About The Analyst: The Mid Cap Darlings is brought to you by the Awkward Economist - Sifiso Skenjana. He has a breadth of experience in portfolio management, economic research and investment strategy and management consulting. He is founder and financial economist at AFRA Consultants. He is currently pursuing his PhD.

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