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Johannesburg - Vukile Property Fund, whose share price performance hasn't exactly shot the lights out in recent years, has emerged as the R97bn listed property sector's best performer for 2009, a report from Catalyst Fund Managers has showed.
Vukile, which owns a number of shopping centres that cater mainly for lower-income consumers, delivered a total return of 25.8% in the year to date (January to September). That compares to the listed property sector's total return of 9.6% over the same time.
The other top performing property stocks in the first nine months of 2009 are Premium Properties (25.5%), Redefine Income Fund (22.9%), Capital Property (22.2%), and Pangbourne Properties (19.5%). The worst performers so far in 2009 are hotel fund Hospitality B with negative total returns of -17.4% and Growthpoint Properties with -1.9%.
Catalyst Fund Managers CEO André Stadler said although the performance gap among the sector's 16 counters has widened significantly, listed property as an asset class remains an attractive alternative to other income investments such as cash and bonds.
Key incentive for listed property investors, said Stadler, is that the income paid out by property companies (distributions) is still expected to grow by an average 8% over the next 12 months.
That means the sector currently offers a 12-month forward income yield of around 9.36%, significantly more than the 5.95% that investors can get if they stash their cash in a fixed interest bank account for 12 months. It also compares favourably to the yield to maturity on the R157 long-term government bond of 8.29%.
Best asset class
Stadler noted that in September listed property was the best performing asset class in SA and even outperformed equities. The sector's total return of 2.05% compared to 0.25% for equities (Alsi), 0.62% for cash, and 0.08% for bonds (All Bond index).
Analysts ascribed Vukile's recent share price rally to its value proposition. Keillen Ndlovu, co-head of Stanlib's property franchise, said the stock has traditionally been underrated, probably due to concerns that many of its buildings are located in older, secondary locations.
But Ndlovu said it appears retail centres in lower income areas are now outperforming their higher income counterparts which are more dependent on discretionary spending. "The discount that Vukile has traditionally traded at is therefore no longer justified, as the stock offers better growth prospects than many of its peers."
Vukile is one of only a handful of listed property companies that still managed to deliver double-digit growth in income payouts this year, with distributions up 10.9% for the 12 months to end-March. The fact that Vukile has recently internalised its management company is another positive which should boost distributions over the next 12 months, said Ndlovu.
Vukile's R4.5bn property portfolio includes Randburg Square (the former Sanlam Centre) in Johannesburg, Phoenix Plaza in Durban, Pinecrest Shopping Centre in Pinetown, Dobsonville Shopping Centre in Soweto and Hillfox in Roodepoort.
- Fin24.com
