Avior Capital Markets - Vukile Property Fund Ltd. (12ZQ) VKE | Setting down a marker

Report

Avior Capital Markets

VKE | Setting down a marker

Vukile Property Fund (VKE) reported a HY'18 DPS of 72.65cc (+7.4% y/y) ahead of our expectations of 72.4c (+7.0% y/y). Operationally the fund performed well with like-for-like net property income growth of 6.1% driven by contractual escalations of 7.3%, encouraging renewal reversions of 5.4% and a vacancy decline of 20 bps to 4.1% (from FY'17). Vukile's portfolio has fundamentally changed in composition through significant corporate actions completed over the last year with offshore accounting for 24% by value and 86% of the South African portfolio is in the retail sector. While DPS grew by 7.4% y/y we highlight that the growth in distributable income per share was flat y/y due to timing inconsistencies associated with its retail transformation. In the note we analyse the fundamental change in Vukile's portfolio, the associated impact on the balance sheet, update on the local property portfolio, analyse the recently announced Spanish acquisitions, update our distribution growth forecast and valuation.

04/12/2017 1 EN

Underlying

Vukile Property Fund Ltd.

Vukile Property Fund is a property loan stock company. Co.'s business activity consist of: property fund, which is a listed property fund that owns and manages its own portfolio of office, retail and industrial properties; and property asset manager, which is an asset manager providing asset management services to Sanlam Life Insurance Limited, in respect of their investment property portfolio. At Mar 31 2011, Co.'s property portfolio consisted of 74 properties. Co.'s office, industrial, and retail properties are located in Gauteng, Western Cape, Eastern Cape, Northern Cape, Mpumalanga, KwaZulu-Natal, Hatfield, North West, Free State, Limpopo, and Namibia regions.

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ZAE000180865 Johannesburg Stock Exchange South Africa

Provider

Avior Capital Markets

Avior is a globally recognised capital markets research and trading firm, with the broadest research coverage within the region, with 100+ SA and 20+ SSA companies under coverage. Avior services clients from offices in London, Cape Town and Johannesburg.

Our research quality is consistently recognised in local and global surveys, with 18 analysts currently rated in their respective sectors (FM 2017). Value add through in-depth, innovative, high quality and consistent research with comprehensive underlying fundamental modelling supported by regular analyst and roadshow interactions.

Avior has proven that by working closely with our clients we can mutually develop dominant positions in certain sectors, going from strength to strength. Avior has a dedicated ESG team, having been ranked #1 in Corporate Governance research since 2008.

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