Commercial News

Revaluation of the income-producing properties helps Pivotal grow its asset value

The Pivotal Fund, a development property company, grew its net asset value (NAV) per share 23.19% in the year to February to R22.80, ahead of market expectations.

Closing 5.71% lower at R16.50, the company’s share price is trading at a significant discount to net asset value and some fund managers have deemed it to be a buy, saying it offers value.

“The growth in our NAV per share was attributable to the revaluation of the income-producing properties, fair value adjustments on current developments and financial instruments, an increase in net working capital, and gains on foreign currency translation,” said financial director Aaron Suckerman at the release of financial results for the year to February.

“Our strategic objective remains generating consistent returns from our portfolio of investments over time, achieved through capital growth from our completed portfolio, unlocking development margin on key developments, and growth from our offshore investments,” he said.

Pivotal, which listed in December 2014, has a development pipeline of 674,000m².

MD Jackie van Niekerk said: “Our focus remains on creating sustainable value for our investors by focusing on consistent growth through our extensive development pipeline, international investments and proactive management. Pivotal has a secure long-term development pipeline that was further bolstered with the acquisition of additional development land to the value of R494m.

“The conversion of our secured pipeline to current development commenced at Loftus Park mixed-use development phase one, Kyalami Corner shopping centre phase one, Hill on Empire building ‘A’, as well as the redevelopment at Wonderboom Junction shopping centre,” she said.

Pivotal’s market capitalisation was about R5bn when it listed and is now nearly R6bn. Its total assets increased 33%, growing to R13.8bn over the financial year.

During the reporting period, Pivotal also attained R1.2bn worth of international assets, having had no offshore exposure previously, as it looked to diversify against risk. Post financial year-end, the fund has exposure to various African countries, and eastern Europe’s fastest growing economy, Poland.

As at February 29 this year, Pivotal’s combined property portfolio was valued at R11.3bn and R1.2bn for directly and indirectly held assets respectively. Pivotal has also concluded the purchase of its first asset held directly in the rest of Africa, being a 37.1% share in the Oando Wings Office development being built in Nigeria.

Pivotal is 45.8% geared, with R5.8bn worth of borrowings.

Suckerman said the company was well-insulated against economic risk. “We believe we are well-positioned to weather the current economic and political uncertainty by derisking our current development pipeline.”

This was done “through pre-letting activity, development contracts which are fixed so we are not exposed to currency fluctuations, and cash flows that are underpinned by quality income-producing assets which account for 74% of our property portfolio.”

Listed property analyst Lawrence Koikoi said Pivotal was an attractive NAV play.

“Pivotal delivered good sets of results, with strong NAV growth above guidance. It is encouraging to see that the company is diversifying into offshore, given slow growth in SA, while also maintaining a quality portfolio in SA.

“Their South African office and retail vacancies are (among) the lowest in the sector at 2.2% and 2.0%, respectively. There seems to be value in the share price currently, if such good performance is maintained,” he said.

 

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