Author Archives: IJGResearch

Oryx FY14 Initial Impression

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Oryx Properties Limited (Oryx) released its results for the financial year ended 30 June 2014, reporting 11.8% distribution growth to 148.0cpu from 139.5cpu reported for FY13, 3.5% above our estimate of 144cpu. Over the same period EPU increased by 99 percent, from 166.66c to 331.75c, largely on account of an increase in the fair value of investment properties. As such, the property portfolio is now valued, independently, at N$2.0 billion, up from N$1.506 billion as at end June 2013. HEPU rose by 8.9% to 162.16c from 148.9c in FY13 – above our estimate of 144.0c – with the surprise mainly attributed to slightly better than expected revenues, lower than expected vacancies and a lower than forecast cost of debt financing.

The company displayed another period of good operational performance, with net rental income increasing by 23.7% y/y to N$162.9m – in line with our estimate of N$164.0m, supported once again by above average occupancy levels (reported at 99.1%), increased revenues from the additional (11,000m2) lettable area at Maerua Mall following the completion of its extension, and the recently acquired Gustav Voigts Centre. Profits after tax jumped by 615%, mainly as a result of the N$74m fair value adjustments of investment properties.

Rental expense increased by 44.9%, from N$28.9m to N$41.9m on account of the increase in retail area as well as electricity and other municipal charges escalating at inflation-plus levels. This was, however, countered by improved recoveries from tenants.

Vacancies (as a % of lettable area) increased from 0.4% as at June 2013 to total 0.9% at financial year-end. This, however, was largely on account of an increase in the gross-lettable area over the period.

The distribution reported translates in a 12month distribution yield amounting to 8.22%, a decline when compared to the same period of 2013, and a premium to the comparable 10-year government bond. This trend makes the stock less attractive in an interest rate hiking cycle as bond yields are expected to expand further. The last date to trade for the distribution of 80.75cps is on 5 September 2013, with the payment date set for 26 September 2013.

We are currently reviewing our Oryx pricing model and will release a follow-up report upon further analysis and discussions with management, as such, we leave our target price unchanged for now. We continue to take note of the limited availability of NSX local stock, and thus retain our HOLD recommendation.

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Bidvest Namibia FY14 Initial Impression

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FY14 Initial Impression – Margin Pressure!

BVN released its results for the year ended 30 June 2014. The firm posted reasonable results in light of the difficulties the fishing division finds itself in. EPS fell 10.6% to 129.6cps and HEPS decreased 10.4% to 129.5cps, missing our forecast. However revenue came in exactly inline with our forecast at N$3.7bn, thus the earnings miss is attributed to weaker than forecasted margins.

From a segmental perspective “fishing” disappointed on trading profit level, while “services” disappointed on both revenue and trading profits and “food and distribution” surprised negatively on trading profits and margins.

Commercial businesses kept the boat afloat

While BVN managed to grow revenues by 10.4% y/y to N$3.7bn, mainly attributed to the T&C business and Freight and Logistics, cost of sales grew at 13.8% and operating costs by 36.9% to N$385.3m from the N$281.4m reported for FY13. The main cost booster came in the form of the quota rentals fees BVN had to pay up in order to counter the impact of their lower direct quota allocation.

Costs almost sunk the ship

Trading profit shrunk by 16.7% y/y to total N$501.3m. As usual, the fishing division supplied the largest chunk of trading profit, coming in at N$407.1m or 81%. This figure is 23.0% lower than the N$528.5m seen in FY13, despite the division’s individual revenue increasing by 4.6% y/y, reflecting depressed margins resulting from the quota rental fees. The fishing operations FY14 trading profit margin fell to 24.5% from 33.2% reported in FY13. Price regulations in the Democratic Republic of Congo and a general oversupply in the company’s traditional markets following importation restrictions implemented in Nigeria, led to an 18.6% average lower realised selling price in US$ for horse mackerel. The weaker Namibian Dollar offset the lower US Dollar price effect on revenue, but also had a significant impact on costs.

Contribution by Commercials

Food and Distribution contributed 4.9% of total trading profit (while contributing 32.9% to total revenue) and rose 15.8% to report a trading profit of N$24.6m, despite a drop in poultry sales as a result of price pressure caused by restrictions on imports. BVN reports that almost all businesses in the Industrial and Commercial Products divisions showed improvement in trading results. Projected activity in the oil and gas industry supported the Freight division.

Increased payout ratio

A final cash dividend of 39cps was declared, with the total dividend of 63cps for the year, thus the company cut dividends by 8.7% on FY13, with the payout ratio increasing to 54% from 53% before. Last day to trade is 5 September 2014 with the dividends payable 26 September 2014.

Valuation and recommendation

We are currently reviewing our BVN valuation model; and as such have left our forecasts and target price unchanged and retain our BUY recommendation, with an eye on the attractive dividend yield of 4.8% and the view that the worst is behind us. We will release a detailed report following management discussions.