Category Archives: Oryx Properties

Oryx Properties Limited (Oryx) released its results for the financial year ended 30 June 2014, reporting 6.1% distribution growth to 148cpu from 139.5cpu reported in FY13, 3.5% higher than our estimate of 143cpu. Over the same period, EPU rose by 99% to 331.75c on the back of a significant increase in fair value of investment property and a bargain purchase gain of N$26.7m due to the revaluation of the Gustav Voigts Centre after its purchase. HEPU rose by 8.9% to 162.16c from 148.89c in FY13 – above our estimate of 143c.

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$163.6m, supported once again by above average occupancy levels (reported at 99.1%) and new rental streams from Maerua Mall, as well as the Gustav Voigts Centre being included for the first time. Oryx reported a profit of N$106.9m (up over 600% y/y), despite a sharp increase in rental expense and finance costs. The additional profit being attributable to the fair value gains, bargain purchase gain and growth in revenue. Headline earnings grew by 22% to N$100m. Much of this increase was due to revenues attributable to projects funded through the rights issue and thus per unit growth was lower at 8.9% as stated above.

Vacancies (as a % of lettable area) increased from 0.4% in FY13 to 0.9% in FY14. This is more in line with our benchmark rate of 1.5% and we expect to see a further slight deterioration in the occupancy rate over the next year due to competition in the form of the Grove and other malls as well as a normalisation in the retail occupancy levels.

As at year end 2014, Oryx’s properties were valued at N$1.977bn. Retail made up the largest percentage of the valuation at 64%, Industrial contributed 29% and Offices 7%. In November 2013 Oryx acquired a 100% interest in Tuinweg Property Investments (Pty) Ltd, the owner of the Gustav Voigts Centre. Thus the centre has contributed to the increase in rental income from this time. The Maerua expansion and upgrade was completed during the course of the financial year (with the exception of internal works at Checkers) and has also contributed greatly to the increase in rental income. 2015 will be the first year that these two additions will contribute 12 months of rental income which will lead to higher revenues.

The distribution reported translates in a 12 month distribution yield amounting to 8.2%, a decline from 8.9% for the same period last year. The decline can be seen as a function of a high share price and the rights issue leading to more units in the base calculation. The last day to trade for the second half yearly distribution of 80.75cps was on 5 September 2014, and the payment date was on 26 September 2014.

Based on our FY15 forecasted distribution of 149.9cps, the current unit price is above our warranted price of N$16.30, based on a justified yield of 9.2%. Nevertheless, we do not believe that the company’s unit price will decline to this level due to supply-demand limitations within the local equity space, and thus have a target price at the current level of N$18.20. Thus, the total return expected is described by the distribution per unit only. We keep our HOLD recommendation for 2015 as we feel that the strong management team has the ability to continue to add value to the share price in the long term, despite the current period of consolidation following major investment and unit-price growth over recent years. Stronger growth is forecasted for 2016 and 2017.

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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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