Resilient Reit has again proved that the premium at which it trades on the JSE is justified.
At a forward yield of 4.3%, versus the sector’s average of 7.5%, the company is one of the listed property sector’s priciest counters.
But management last week yet again delivered impressive earnings growth numbers, achieving a hefty 25.1% increase in the dividend payout for the year to the end of June.
That is the highest dividend growth delivered by Resilient since its listing in 2002, and way ahead of the average 6%-8% growth expected for the sector as a whole this year.
Resilient’s pleasing growth numbers were supported partly by a recent rights issue which reduced the cost of funding but also by its aggressive expansion into offshore property markets. The latter has offset the effects of the tough economic conditions to which its SA portfolio of shopping centres is exposed at present.
Resilient’s offshore focus is on Central and Eastern Europe via stakes in JSE-listed New Europe Property Investments (Nepi) and Rockcastle. More recently, shares in UK-listed mall owner Hammerson and new AltX contender Greenbay were added to the portfolio, which made Resilient’s offshore portfolio balloon from R8.3bn in June 2015 to R14bn now. That represents about 36% of total assets.
Resilient also owns an R18.5bn portfolio of 28 shopping centres in SA, most of which are located in secondary cities and rural areas such as Polokwane, Tzaneen, Nelspruit, Mafikeng and Richards Bay. It has a sizeable stake in Fortress Income Fund and an R1.88bn exposure to Nigeria, where it co-owns three shopping centres with Shoprite Checkers.
The decision by management, under the helm of MD Des de Beer, to forward hedge the projected income from its offshore holdings has paid off well.
The strategy has meant that dividend payouts from Nepi (euros), Hammerson (pounds) and Rockcastle (US dollars) weren’t affected by the recent strengthening of the rand against major currencies.
De Beer says the company’s forward hedging policy provides additional certainty to investors amid ongoing rand volatility.
He notes that the projected income from Resilient’s offshore investments for the next 12 months has been forward hedged at rates substantially higher than those of the prevailing market.
Dividends are set to continue to rise at double-digit rates, with De Beer forecasting an increase of between 14% and 16% for the year to June 2017.
Resilient also continues to deliver capital growth . In the year to date, the share price is up 21%, which is well ahead of the SA listed property index’s rise of 14% over the same period. That follows a share price increase of more than 100% in the two years to the end of December.
The key question for investors who don’t yet own the stock is this: have they missed the boat?
Meago Asset Managers director Jay Padayatchi says the counter is likely to continue to attract strong support from investors. He notes that while Resilient may at first glance appear expensive relative to several of its peers, the counter is deserving of this premium owing to its defensive qualities and prudent management.
"Resilient is an exceptionally well-run company and will again deliver on double-digit distribution growth in the year ahead, which is an enviable feat for any company operating in a tough global economic environment,’’ Padayatchi says.