Hyprop Investment doubts Attfund merger
A better than expected performance from mall owner Hyprop Investments for the second half of 2011 should dispel any lingering doubts about the acquisition of Attfund’s R9bn shopping centre portfolio in September last year.
Analysts were concerned that the Attfund deal, which doubled Hyprop’s assets to a colossal R20,2bn, including large centres like Clearwater Mall on the West Rand, Woodlands Boulevard in Pretoria and Cape Gate in Cape Town, would dampen short-term income growth prospects.
But last week Hyprop surprised the market with an impressive 10,4% rise in income payouts for the six months to December. That brought the total growth in distributions to 7,3% for the full 2011 year.
Clearly, Hyprop CEO Pieter Prinsloo’s focus on growing the fund’s exposure to dominant shopping centres in prime areas is paying off. Prinsloo says there’s no doubt that the defensive nature of Hyprop’s newly enlarged portfolio has underpinned earnings in what is generally still a tough retail trading environment.
Star performers were Western Cape super regional centre Canal Walk, The Glen in the south of Johannesburg and Clearwater Mall. Income growth was also supported by a one-off benefit of 3,7c/share following the deferred payment on the back of the Attfund acquisition.
It seems that uncertainty about how successful the operational integration of the Attfund portfolio would be was a key reason for Hyprop’s lacklustre share price performance. The stock is up less than 5% over 12 months against a rise of nearly 20% for the listed property sector over the same time. Even so, Hyprop is still trading at a premium to the sector: the stock offers a yield of 7,1% compared with the sector’s 7,9%.
But Coronation Fund Managers property analyst Anton de Goede believes the stock is fairly priced, given favourable prospects for revenue growth over the next few years. Though the planned R920m expansion of the Rosebank Mall could be dilutionary over the short term, De Goede expects Hyprop to return to its strong historical distribution growth profile in 2013.
For the five years to 2009, Hyprop reported average income growth of 15%/year. Says De Goede: “Distribution growth in 2013 and 2014 could be greater than that of the sector.”
