Redefine | Softening the blow

Redefine (RDF) reported HY'18 DPS of 47.3c (+5.5% y/y), in line with our expectations. Non-recurring income of R116m was generated in the period (2.2c, 4.6% of DPS) and R117m in the prior period. We estimate an implied recurring DPS growth of +6.0%.Like-for-like growth in South African NPI increased by +5.1% y/y which was a deterioration from the comparable period but an improvement on FY'17 (HY'17: +5.9%, FY'17: +4.2%). RDF is currently offering a forward yield of 8.8%, relative to the SAPY of 8.4%. However, the anticipated reduction in once-off income will impede growth over the next 3 years, in our view. We have forecasted the material reduction to occur in FY'19, however a more gradual process may be undertaken which would impact the predictability of RDF's income stream. In the note we provide an update on the domestic portfolio, offshore investments, balance sheet changes, sum-of-the-parts, distribution forecasts and non-recurring income expected.