| Monday 31 January 2022 Good morning Voornaam,
Industrials REIT released a trading update for the three months to December 2021. The momentum in new lettings and renewals is strong, with average uplifts in rent of more than 20% at lease expiry or renewal. Funds with office and retail properties can only dream of flat renewals, let alone increases. It was also a busy quarter for acquisitions, with six estates added to the portfolio with a combined value of over GBP40 million.
Occupancy was 93.8% at the end of 2021 and the fund has a record pipeline of new lettings and renewals under offer. The development activities are also going well, with the REIT noting a yield on development cost of 22%. The loan-to-value ratio of 28% is low for a property fund, leaving plenty of space for further acquisitions. Three more estates are under offer (combined value GBP11.2 million) and the pipeline of other opportunities is strong.
On a busy day for property updates, Hyprop announced the acquisition of four retail properties from Hystead Limited. Hyprop holds 60% in Hystead, with this subsidiary needing to complete a liquidity event by no later than May 2022 under various agreements between the shareholders. Long story short, Hyprop is acquiring four malls in Eastern Europe for a total consideration of EUR193 million (over R3.3 billion) from its subsidiary.
The net impact is that Hyprop will have greater equity exposure to Eastern Europe and the guarantees provided by Hyprop on Hystead's balance sheet will be reduced. This helps address the currency risk of using local assets to secure Euro denominated debt. Following the disposal of the remaining property in Hystead, that entity is expected to be wound up. This is a Category 1 transaction, so Hyprop will issue a circular and needs to obtain shareholder approval.
There's a mandatory offer on the table for enX Group, as MCC Contracts an d African Phoenix Investments are considered "concert parties" under Takeover Law. This would be the case where parties have agreed to vote together on shareholder matters, for example. After the purchase of shares by African Phoenix in an off-market transaction for R5.60 per share, the parties have collectively moved through the 35% threshold.
With a share price of R8.50 (much higher than the mandatory offer price of R5.60), holders of 21.2% of enX have already provided irrevocable undertakings that they won't accept the offer. The company will still need to issue a circular and independent expert opinion on the value. That should make for very interesting reading. Importantly, this isn't going to be a delisting at this stage.
Given the level of activist shareholder interest around Tongaat at the moment, I'm not surprised to see that the Takeover Regulation Panel (TRP) has received notice of an intention by a consortium to se ek a review of the TRP's waiver ruling linked to the pending rights offer. The consortium has requested a hearing before the Takeover Special Committee and has not yet provided Tongaat with the grounds for the review.
TrustCo took a knock of 12.2% on Friday after releasing a trading statement for the 11 months to August 2021. Despite a lovely introductory paragraph about value creation, the reality is that revenue has fallen between 36% and 56% and the headline loss has worsened dramatically from 19.06 cents to between 45.32 and 49.14 cents. The company notes that the Namibian economy is struggling to recover from the pandemic. The share price has lost two-thirds of its value in the past 12 months.
Today's feature articles include two companies that are really struggling. The first is Massmart, where the pink elephant in the room (Game) is causing ongoing pain and suffering. The other is EOH, which has finally acknowledged that the balance sheet may need an injection of equity. At the other end of the spectrum of success, Stor-Age has executed another acquisition in the UK.
In the latest episode of Magic Markets, we reflect on the analysis done in some of our earlier Magic Markets Premium shows. Mohammed Nalla and I felt like "Dr. No" at some stages because we kept saying that US stocks were overvalued. The last few weeks have proven us correct. Listen to our process of reflection here.
Finally, Chris Gilmour updates us on the macroeconomic and political news that is moving markets.
Good luck for the start of your week!
The Finance Ghost
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Local and Offshore Market News |
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| | | EOH isn't taming its debt EOH shareholders have been knocked into the dirt again as the company struggles to bring its debt under control. How will it avoid a rights offer? Read More |
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| | | Stor-Age expands in the UK After a successful capital raise in the market, Stor-Age has concluded the acquisition of properties in the UK with a total deal value of GBP37.5 million. Read More |
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| | | The Week Ahead The US Federal Reserve appears set to increase US interest rates further and faster than originally anticipated. Read More |
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