Synergy Income Fund among top performers

Posted On Monday, 14 July 2014 18:57 Published by
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Synergy Income Fund's A and B units have been among the listed property index's top performers since the beginning of the year, with both having risen nearly 20%.

William Brooks

The index gained about 6%. Analysts said Synergy had benefited from a strong portfolio of shopping centres in poorer‚ often rural‚ areas of South Africa. In December Vukile Property Fund announced it would buy 34% of Synergy in a deal valued at about R338m. This has also buoyed the group. Vukile has said it is not looking to acquire all of Synergy yet.

Synergy internally manages retail assets which include mid- sized shopping centres in high- growth areas which serve lower- to middle-income consumers. It listed in 2011 with a portfolio of four retail assets at a market value of R368m and a combined market cap of R600m. Its has subsequently expanded to 15 retail properties with a gross lettable area of 198‚767m²‚ valued at R2.2bn‚ or R11‚224/m².

"There is a potential takeover premium in the price with the possibility that Vukile tries to buy the entire company. Price movement up and down can be accentuated in small companies like Synergy where little trading takes place‚" Old Mutual Investment Group portfolio manager Evan Robins said on Thursday.

"In addition‚ in my view‚ Synergy's price last year was too cheap‚ so some catch-up in the price was warranted‚" he said. Alternative Real Estate Management's Maurice Shapiro said Synergy remained a clear retail quality play. "This is a keen business with retail assets that have room for growth. The A units have done especially well. When the interest rates rose in January‚ the A units did not falter."

Momentum Asset Management property head Nesi Chetty agreed that Synergy had an impressive portfolio. "Vukile has taken a strategic equity stake in Synergy which has a portfolio of very good retail centres with above average trading densities. Those centres which are anchor tenanted by Spar are doing relatively well."

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