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Headwinds for Hyprop as SA portfolio devalued by R1.1bn

Latest results also show that group distributable income for its half-year to the end of December 2019 decreased 13%.
Rosebank Mall, which is owned by JSE-listed retail landlord Hyprop. The group has seen a R1.1 billion devaluation in its South Africa portfolio, according to its latest results for the half-year to December 2019. Image: Supplied

Still struggling to exit its poor-performing malls in the rest of Africa, JSE-listed retail property giant, Hyprop, now faces further headwinds closer to home.

The owner of well-known shopping centres like Canal Walk in Cape Town and Joburg’s Rosebank Mall, saw its South African property portfolio being devalued by R1.1 billion during its half-year to 31 December 2019.

Hyprop posted one of its worst sets of interim results after markets closed around 5:30pm on Thursday, with distributable income for the period decreasing 13% – from R985 million (HY2018) to R857 million (HY2019). This saw distributable income per share decreasing from 385.6 cents to 335.6 cents.

The decline was in line with the upper end of its guidance for the period. However, the fact that Hyprop decided to reduce its pay-out ratio to 92%, saw the group declare a dividend per share (DPS) of 308.7 cents. This effectively meant that DPS for the period was down by 20%.

Hyprop’s already under-pressure share price plunged around 10% (to R41.05) on the news in early trade at around 9:20am on Friday morning. However, the stock recovered to just over 3% down, at R45 a share, by 3pm. The share is down more than 18% this year.

Read: Hyprop hits a low, Fairvest delivers market-beating results

A predominantly retail-focused Real Estate Investment Trust (Reit), Hyprop currently has interests in R48 billion worth of property assets in South Africa, sub-Saharan Africa (excluding South Africa), and Eastern Europe. Its local portfolio market value, as determined by the group’s independent valuers, decreased from R28.6 billion at its previous year-end in June, to R27.6 billion at 31 December 2019.

Hyprop blamed the devaluation on the impact of negative rent reversions on net property income and an increase in the discount rates and exit cap rates used by the property valuers to value certain properties.

Read: Hyprop dividend hit by up-for-sale Nigerian and Ghanaian assets

The devaluation in its South African portfolio comes as the group is still struggling to deal with the disposal of its remaining poor performing malls in Ghana and Nigeria.

For its last financial year to June 2019, the group suffered a R1.45 billion impairment on its “rest of Africa” assets, which included stakes in the old AttAfrica retail portfolio and a stake in a mall in Nigeria. A few malls within the portfolio have since been sold.

Commenting on Hyprop’s interim financial performance, Nesi Chetty, senior fund manager at Stanlib, says while the results are in-line with its guidance, the Reit had a very tough year.
 
“The group has been negatively impacted by large reversions on their retail portfolio and also writedowns on their African assets, which are up for sale,” he notes.
 
“The rise in cap rates on some of their centres is appropriate given how weak the trading and performance is,” he adds.
 
“Hyprop was one of the first property companies to rebase their earnings sharply downwards. A payout ratio at 92% does give the group some cash flow and balance sheet flexibilty, especially as it brings down its high loan-to-value ratio,” Chetty points out.
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Just another SA disaster. I am surprised its only devalued by 1.1 billion. Its worth much less than that.

There is no market. They themselves say they are struggling to dispose of these properties. Who will buy it and at what. That’s the main question.

Its SA rubbish.

You are a rubbish. Take your negativity and keep it to yourself! SA is resilient and dynamic and we have the most dynamic entrepreneurs in the world. Our SA Investors have lost tons of cash in the UK, NZ and Australia. Throwing good cash to two small markets at the end of the earth. Take your mmm, and either comment positively or constructively. Nobody needs your rubbish! Thanks

Dear Dadape – until a year ago, I would have agreed with you. Sadly your (and my opinion) is now 100% incorrect. SA is not dying, it is dead. All the metrics (ignore emotion as you would expect your doctor to) point south, big time

Don’t get so emotional.

Moody’s downgraded this SA company to “JUNK” in Feb 2019. A synonym for “JUNK” is RUBBISH” as per the link below. (left third from the top).

https://www.thesaurus.com/browse/junk

SA Junk if you like?

Would be happy to get some concrete facts on why I should consider ZA an investment destination when it has had <1% growth for 5 years and makes up <0.5% of the world's economy.
Agree with resilient and dynamic, but we are certainly not special or exceptional. Probably average to below average when you look at our performance in a global context.
Need to answer the question why ZA and international companies are divesting from South Africa.

Mmm is not a rubbish! SA has very few entrepreneurs and they are detested by the ANC cabal. Get real. The guys comments may sting but they are true. The world grew nicely last year and we are probably close to a recession-that says everything about what a total failure this country is!

Then look at the SOEs, 6 million people hungry here in the 21st century, the captured judiciary , EWC and NHI coming, a murder every 30 minutes and a rape every 15 minutes, 18 million people getting basic income grants and not even 150000 earning more than USD 100k per annum.

Not exactly what you choose to describe as “the most dynamic entrepreneurs”

That R1.1 billion did not evaporate. It was devoured by Eskom, Cosatu and the redistributive rates and taxes regime. It was expropriated without compensation by the socialist ANC regime. People are up in arms about the idea that pension funds may be expropriated to fund the Eskom bailout. The pension funds just lost R1.1 billion because of ANC incompetence.

Don’t worry about prescribed assets or the expropriation of pension funds. At this rate, there won’t be anything left for them to steal!

Dadape either lives on another planet, or he is the beneficiary of plunder.

Who wants to buy a farm ?

…watching the ZAR dropping against the USD/EUR/GBP on-screen!

(GBP breached R20..)

A German language pronunciation joke comes to mind:

English forex trader (referring to the ZAR): “I see she is sinking!”

German forex trader: “What are you thinking about?”

Is Shoprite not also wanting to sell property and then rent it back?
One must say that malls have been springing up like mushrooms during the last few years.

It is good to be listed on the JSE. Easy money, gratitude to regulations. Alternative investment is hard work. And then comes the coronavirus and the market uses that as an excuse to adjust? It appears that the financial market medicine of buying gold to cure the virus, has also lost steam.

This is because you are not understanding what is happening. The sell-off in the global markets in last week is not really because of Coronavirus. The sell-off is because of over-leveraged positions and margin calls as a result of a decline in market that was arguably triggered by Coronavirus. People need cash to fund those margin calls, not gold.

Thank you Johan_V. I understand perfectly well what is going on. Clearly you have a tendency to attempt to educate even if an incorrect assumption. Finally, if there was value in the shares why would the market react -. In the case of Steinhoff, even if the “assets” bought by Markus Maddoff would be worth only 50% of paid for, the shares would certainly not be worth at the loweest trading value i.e. <R2.00. If that is rational, I certainly would stand to be educated to what is irrational?

Exactly,

what is they saying ” never pass on the opportunity of a good crises”

It is natural to focus on the risks that one can see and understand, hence people in RSA are very negative about RSA. However, something that is missed is that there is a LOT of risk in the US and European markets as well, but risks of a different kind. Negative interest rates, artificially pumped up markets, heavily over-leveraged companies, etc.

In RSA, our market mostly reflects our reality. For the most part, the developed markets don’t reflect their reality. This doesn’t mean one shouldn’t invest offshore – I believe people should strongly diversify offshore, but obviously be careful of what you buy and global index funds are (currently) a big no-no in my opinion because it contains all the rot along with all the good.

If you want to comment on SA disasters, then do so within global context, and you’ll end up making more sensible decisions as well.

100% Dadape, i fail to understand why you stay in a country, call it a disaster and instead of being a positive active citizen or go somewhere else where you will be happy. You choose to spread negativity.
If you ask me i see more opportunities now and if you don’t get it read about most successful business people in SA and abroad. Most of them made it big by maximizing opportunities while markets were depressed.
Thank you have a good life.

The most millionaires are created in a recession.

End of comments.

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