Oryx’ results “mixed”

NDAMA NAKASHOLE

PSG Namibia has described Oryx Properties’ results as “quite mixed”, with net profit coming in below expectations at N$37.8 million below PSG’s N$87.8 million estimation.

Oryx Properties yesterday published their results for the year ended 30 June 2018.

The total distributions per unit, at 157.0 cents per linked unit (cpu) is above PSG’s forecast of 152.3cpu but a reduction of 6.0% from 2017. Headline earnings exceeded expectations at 154.4cpu (PSG: 149.5cpu). The NAV per share increased from 2032 cps to 2 043 cps compared to PSG’s forecast of 2 143 cps for full year.

At year end the property portfolio was valued at N$2,561 billion, up 5.2% (PSG: 3.5% to N$2,520).

“If the portfolio value is normalised for South African property disposals of N$70 million, then the core portfolio grew by 8.3%,” PSG said in their report on Friday.

The increase of N$23 million in the fair value of properties (2017 was N$3.8 million) was higher than the previous period as a result of the completion of the Maerua Mall upgrade, the opening of ‘The Pantry at Avani’ and positive rental reversions and extensions in the industrial portfolio, PSG further said.

Oryx completed the planned investment of N$30 million in Tower Property Fund as part of its investment strategy recorded at a fair value of N$26 million, compared to N$1.8 million in 2017 financial year. The investment has contributed a dividend of N$3.78 million for the financial year. An additional dividend of N$ 10.9 million will be paid to unitholders but is not included in income at year-end due to accounting policy.

NOTEWORTHY

The results indicate the total distribution per unit is 157 cpu. This includes 14 cpu from a dividend which is only received after year end. The vacancy factor climbed to 6.5% compared to 6.4% at FY17. PSG’s expectation was for this ratio to decline to 4.5% as there were plans in the pipeline to sell some of the vacant properties, including the Isando Johannesburg property which has been vacant for the full year. This property contributed 57% to the overall vacancy factor in FY18. These sales did not realise, says PSG.

Finance costs grew by 16.1% in the 2018 financial year, double PSG’s expectation of 8.1%, significantly affecting net profit. Large capital expenditures of N$174 million includes upgrades to Gustav Voigts centre and solar panels at Maerua Mall.

OUTLOOK

The current challenging economic climate remains, but there is a recovery expected in the Namibian economy to yield positive GDP growth in 2018 of around 0.6% after a contraction in 2017.

“The implementation of ORY’s offshore investment into Tower International (Pty) Ltd have management optimistic. Events subsequent to year end include the successful conclusion of the N$300 million Euro equivalent investment in Tower International and the declaration of final dividend of 14cpu.

INVESTORS’ REACTION

PSG says they expect investors to remain concerned about vacancies and little to no gross rental income growth. The addition of Tower Property Fund delivers some diversification and adds to yield at this stage.

“The total distribution yield of 7.8% is below historical averages but stable in a difficult economic environment. The lower than expected NAV, increases the P/NAV to 1.0, above our expectation of 0.9.”