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Vukile Fully Priced?

Posted On Thursday, 07 June 2007 02:00 Published by eProp Commercial Property News
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Punters shouldn't expect much in the way of short-term share price growth. Analysts say Vukile is starting to look expensive relative to its peers, with its share price already up 50% over the past eight months

Leon AllisonTownships and other secondary retail markets are clearly becoming lucrative places for property investors. Vukile Property Fund's strategy to expand and upgrade its shopping centres in Dobsonville (Soweto) and Phoenix (Durban), coupled to a strong uptake of space in the landmark Randburg Square Shopping Centre (the old Sanlam Centre), has helped buoy payouts by a healthy 12% in the year to end-March 2007. Management expects similar growth in distributions over the next 12 months.
However, punters shouldn't expect much in the way of short-term share price growth. Analysts say Vukile is starting to look expensive relative to its peers, with its share price already up 50% over the past eight months.


OPPORTUNITIES

* Quality of portfolio set to improve further if more underperforming buildings are sold: R400m of sales already concluded in 12 months to end-March 2007.

* Major shareholder Sanlam could inject a number of new properties into the fund, further boosting its size and quality of its existing R3,8bn portfolio.

* Nice scope for further rental growth as a large portion (20%) of leases comes up for renewal in the current financial year.

* Macquarie First South Securities property analyst Leon Allison last week upgraded his two-year distribution growth forecast from 10,6% to 11,5%/year.


RISKS

* Shares already trading at a 50% premium to NAV, placing the stock in pricey territory.

* Vukile isn't as liquid as some of the other bigger counters, as 52% of shares are (tightly) held by major shareholders Sanlam and the fund's black empowerment partner.

Last modified on Thursday, 24 April 2014 13:40

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