Redefine may detail takeover in results
REDEFINE Properties is expected to shed light on its anticipated takeover of shopping centre owner Fountainhead Property Trust when it releases its interim financial results for the six months to February on Thursday.
Redefine has had less merger and acquisition (M&A) activity than its rival Growthpoint Properties in the first four months of 2014, aside from its surprise acquisition of Annuity Properties. The listed sector has undergone significant deal flow this year, following many listings last year.
Analysts believe Redefine may announce the disposal of its high-yielding government portfolio, which it may sell to a fund better suited to managing the state as a client. M&A activity will affect the short-term outlook of Redefine's distributions to be paid out to shareholders. It bought Fountainhead's management company in August 2012.
After the acquisition it tried to acquire Fountainhead's property portfolio, but faced a bidding war with Growthpoint. Redefine ended up acquir ing about 66% of Fountainhead's shares.
Redefine CEO Marc Wainer has said Redefine intends acquiring all of Fountainhead. Old Mutual Investment Group SA portfolio manager Evan Robins said yesterday various factors could boost Redefine's distribution outlook for the second half the financial year. "Management in our view should be able to deliver better distribution growth this year than last year. Having said this, distribution per share may be an inappropriate measure for Redefine in the short-term as the fund is repositioning its portfolio to increase quality which can initially come at the expense of earnings growth," Mr Robins said.
Redefine reported 7% distribution growth in the six month period to February last year.
Investec analyst Peter Clark expect s growth to be in line with prospects of 7%-7.5% given in the last results. "The tailwinds to performance would be the investment in Redefine International which has shown good growth mainly driven from rand weakness compared to the previous interim period." Redefine International, 33% owned by Redefine Properties, has direct investments in the UK and Germany.
Growthpoint, the biggest South African-based listed property company, intends obtaining significant stakes in Acucap Properties and Sycom Property Fund in a deal worth R4.66bn, to add retail exposure to its portfolio.
Stanlib property analyst Craig Smith said Redefine was involved in the surge in M&A activity, and a Fountainhead takeover would be an important part of that.
"We do not feel that Redefine has been quiet with regards to M&A. Redefine has been busy trying to wrap up the Fountainhead transaction," said Mr Smith. "The Fountainhead portfolio is valued in excess of R11bn and mainly consists of regional and super regional shopping centres. The proposed transaction will therefore meaningfully increase Redefine's exposure to the retail sector."
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