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Hyprop (HYP) will be the stock in focus: (Price at time of writing: R118.82 (1 June 2016))
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Background and overview of Hyprop (HYP)
Hyprop is one of the largest Property REIT's listed on the Johannesburg Stock Exchange (JSE). They own various mall including:
- Rosebank Mall
- Waterfall Mall
- 75% of The Glen
- Clearwater Mall
- Attebury Value Mart
- Woodlands Boulevard
- 80% shareholding in Canal Walk
- Summerset Mall
Scroll over or click on the funnel chart to get more details of HYPs latest financial results
Financial review:
From the funnel chart its clear to see that their net profit is more than their turnover. This is due to large scale fair value adjustments made to the value of their properties that is coming through the income statement. If the fair value adjustments are excluded from their profits, HYP's net profit margin amounts to, 55.4% (which is a lot lower than the net profit margin achieved by Growthpoint). Still a very strong margin though and one not be snuffed at.
A nice feature of Hyprop is the exposure in not only Africa, but also eastern and central Europe. Hyprop owns properties in Ghana, Zambia, Nigeria, Serbia (in Belgrade specifically) and in Montenegro. So investors looking for diversification outside of South Africa into not only Africa but Europe should take a closer look at Hyprop.
Hyprop is currently trading at a distribution/dividend yield of 5% (assuming mid year dividend will be repeated in year end). While this is not the highest yield available under the REIT's or all shares listed on the JSE, it is pretty healthy and in their latest results presentation they do mention that dividends will be higher than guidance they supplied to the markets earlier.
A nice feature of Hyprop is the exposure in not only Africa, but also eastern and central Europe. Hyprop owns properties in Ghana, Zambia, Nigeria, Serbia (in Belgrade specifically) and in Montenegro. So investors looking for diversification outside of South Africa into not only Africa but Europe should take a closer look at Hyprop.
Hyprop is currently trading at a distribution/dividend yield of 5% (assuming mid year dividend will be repeated in year end). While this is not the highest yield available under the REIT's or all shares listed on the JSE, it is pretty healthy and in their latest results presentation they do mention that dividends will be higher than guidance they supplied to the markets earlier.
The pie chart below shows the contribution of some of HYP's biggest properties to their revenue and distributable income.
What is encouraging to see from the pie charts above is the fact that the margins earned on the various properties are very similar. It's not a case of one property earning substantially higher margins than another property. The contributions to both turnover and distributable income is very similar. The bulk of HYP's revenues and income is made up by three malls (with Canal Walk, Clearwater Mall and Rosebank Mall) making up around 50% of their total earnings and income.
Headline earnings per share (HEPS) came in at R3.84 a share, putting HYP on a PE ratio of 15.3 which is lower than competition, GrowthPoint, but it has to be said GrowthPoint has the better quality property portfolio. Cash generated per share came in at R3.47 a share for the period.
Often the biggest problem for large property owners is their vacancy rates, as empty space means wasted space. Below a summary of HYPs vacancy rates:
Headline earnings per share (HEPS) came in at R3.84 a share, putting HYP on a PE ratio of 15.3 which is lower than competition, GrowthPoint, but it has to be said GrowthPoint has the better quality property portfolio. Cash generated per share came in at R3.47 a share for the period.
Often the biggest problem for large property owners is their vacancy rates, as empty space means wasted space. Below a summary of HYPs vacancy rates:
- Retail: 0.9%
- Office: 7.2%
A few financial ratios to mull over forHyprop (calculated using our Financial Ratios Calculator):
- Debt to Equity Ratio: 0.46 (more than 2 shows high levels of financial leverage).
- Return on Assets (ROA): 2.43%
- Return on Equity (ROE): 3.55%
- Net Profit Margin: 55.40%
- Dividend Yield: 5.01%
Valuation:
While the retail office space in South Africa does seem to be oversupplied, HYP holds strong assets in this space and the vacancy rate of their retail space is very low.
Based on HYP current financial results, their vacancy rates and the quality of their assets and strong dividend yield we value HYP at between R133.79 and R134 a share. Placing them on a PE of 17.2 and dividend yield of 4.44%. Thus at their current price they do offer some value for investors. However investors should look at GrowthPoint too. While they trading at a higher PE ratio, their dividend yield is very strong. Investors should weigh up if they want greater capital growth (possibly with HYP) or higher yields (which in this case would be GrowthPoint).
We use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question.
Based on HYP current financial results, their vacancy rates and the quality of their assets and strong dividend yield we value HYP at between R133.79 and R134 a share. Placing them on a PE of 17.2 and dividend yield of 4.44%. Thus at their current price they do offer some value for investors. However investors should look at GrowthPoint too. While they trading at a higher PE ratio, their dividend yield is very strong. Investors should weigh up if they want greater capital growth (possibly with HYP) or higher yields (which in this case would be GrowthPoint).
We use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question.