Hyprop Investments tipped to excel in volatile economy

Posted On Tuesday, 20 January 2015 15:38 Published by
Rate this item
(0 votes)

Hyprop Investments is a hot stock pick for 2015.

Pieter Prinsloo

Property share prices ran hard last year. The JSE's property index recorded a 26.4% return, while the all share index, bonds and cash returned 10.88%, 10.15% and 5.85% respectively.

While listed property is unlikely to get a return above 20% again this year, certain stocks, especially shopping centre owners, are being touted as potential top performers. One of these is Hyprop, which has a R250bn portfolio including Hyde Park Corner, Clearwater Mall, Rosebank Mall, Somerset Mall and Canal Walk.

It also has exposure to other parts of Africa through stakes in Manda Hill in Lusaka, Zambia, and Accra Mall in Ghana. Macquarie analyst Leon Allison believes the high trading densities at Hyprop's malls will help it to achieve above-market earnings consistently.

He recently upgraded his recommendation on Hyprop from neutral to outperform. While distribution growth is expected to average 10% a year over the next two to three years, analysts are concerned the share may already be fully priced it was trading at R103 late yesterday.

"Hyprop has the best and least replicable South African portfolio of any listed fund. It is not cheap, of course, and has not become cheaper this year," says Evan Robins, a senior portfolio manager at Old Mutual Investment Group. Yet broker Imara SP remains bullish, saying Hyprop is a defensive stock with high-end assets. Other analysts agree it could excel in a volatile economy.

While consumers and retailers could emerge among the biggest winners of the oil price slump, it means "green" technologies are likely to get less attention. For industries that have the option to produce products such as ethanol, used in biofuels, an oil price of below $50 a barrel simply means producing ethanol does not make economic sense.

According to consulting and research firm DaMina Advisors, the break-even cost per barrel for Brazil's ethanol producers is $66. Local sugar producers such as Illovo and Tongaat-Hulett would probably prefer to see their counterparts in Brazil producing more ethanol and thus reducing sugar supply.

With that scenario seemingly off the table for now, the current oil price means excess global sugar supplies are likely to be reduced at a slower rate. Green fuel projects such as the Industrial Development Corporation's plans to revive the Eastern Cape's sorghum industry are also less attractive now than they were six months ago.

Fortunately, green energy generation from wind farms and solar power sources is not as badly affected by the plummeting oil price.

Last modified on Wednesday, 21 January 2015 10:40

Most Popular

Empowering women in engineering through B-BBEE

Jan 13, 2020
Andrew Yorke
Working to embrace the spirit of transformation and developmen.

Repo rate cut by 25 basis points

Jan 16, 2020
Governor_Lesetja_Kganyago_SARB1
The Reserve Bank has reduced the repo rate by 25 basis points to 6.25% in line with…

Cheap cement imports crippling local industry

Jan 16, 2020
Databuild CEO Morag Evans
Local cement manufacturers are being severely undermined by cheap imports from countries…

Health & Safety key drivers for Concor at Oxford Parks project

Jan 13, 2020
Godfrey Baloyi Bennie De Koker Concor Buildings HSE
Health and safety are key drivers for Concor Buildings at the construction of Oxford…

The rising tide of the silver economy

Jan 16, 2020
Chris Cilliers
Whilst we may not yet have discovered the long-coveted elixir of eternal youth, the truth…

Please publish modules in offcanvas position.