In todays taking stock, we discuss how Stor-Age Property Reit showed double-digit growth in overall property revenue for the year.
7 reading min
10 Jun 2021
SOUTH AFRICAN MARKET COMMENTARY
Local markets were mostly flat yesterday, as investor focus shifted to US inflation data due today. The JSE All-Share index closed out the day 0.05% higher at 67,681, while the blue-chip Top 40 index was 0.03% lower. Equities have been in a holding pattern this month as traders try to determine the outlook for central banks' policies amid concerns that a spike in prices as economies emerge from lockdowns could raise borrowing costs.
EUROPEAN MARKET COMMENTARY
European stocks struggled for direction on Wednesday as investors braced for the next reading of US inflation due Thursday. The pan-European Stoxx 600 eked out a small gain by the close, but sectors and major bourses pointed in opposite directions. Health care stocks were the top performers, climbing 1.9%, while the basic resources sector fell 1.8%. The muted session for European markets reflects cautious sentiment elsewhere ahead of the latest inflation data from the US.
US MARKET COMMENTARY
US stocks finished Wednesday’s session near their lows as the market continued to struggle to break out from a tight range. Industrials and financials were the two biggest losers among the 11 S&P 500 sectors, dragging down the broader market. Meme stock mania continued Wednesday with day traders focusing their attention on Clean Energy Fuels this time, pushing the stock up more than 31%. Clover Heath, which surged over 85% in the prior session, pulled back 23% Wednesday. Investors await the next reading on inflation to gauge if higher price pressures are just temporary as the economy continues to rebound from the pandemic-induced recession.
ASIAN MARKET COMMENTARY
Asian shares edged higher but held their recent trading range today as investors focussed on US inflation data and the risk of an upside surprise that could prompt the Federal Reserve to start tapering its massive stimulus. MSCI’s broadest index of Asia-Pacific shares outside Japan were marginally higher at 700.6 points, but stayed in the 698-712 points range it has traded in since late May. Overnight, fixed income markets were the big movers, with some analysts pointing to a setback to more U.S. stimulus efforts, while others suggested a likely clearing out of short positions ahead of the May CPI.
CURRENCY MARKET COMMENTARY
The rand lost some ground on Wednesday, despite better-than-expected economic growth data the previous day had bolstered hopes of an improvement in the country’s finances. At the close, the rand was 1.11% softer at R13.74 versus the dollar. The dollar continued to hover near a five-month low versus major peers on Thursday as investors looked to key US inflation data and a European Central Bank meeting later in the day to potentially set the direction for currency markets.
COMMODITIES MARKET COMMENTARY
Gold prices were subdued this morning, weighed down by a firmer dollar, as investors sat on the sidelines waiting for clearer signals on inflation levels and economic growth ahead of U.S. data and the European Central Bank meeting later in the day. Oil prices slid earlier today as inventory data in the United States, the world’s top oil consumer, showed a surge in gasoline stocks that indicates weaker-than-expected fuel demand at the start of summer, the country’s peak season for motoring.
Stor-Age (SSS) +0.5%
Despite rental income, net property operating income and overall property revenue showing double-digit growth for JSE-listed Stor-Age Property Reit in its financial year ending March 31, 2021, the group reported a marginal improvement in distributable earnings and a decline in its dividend per share (DPS) for the full year on Wednesday. South Africa’s largest self-storage property fund trumpeted that rental income and net property operating income were up 19.3% and 20.2% respectively, while its property revenue was up 14.5% to just over R800 million. However, its actual distributable earnings were up just 0.4% (to almost R454.4 million) according to its results Sens statement. While Stor-Age chose to highlight the fact that its final (second-half) cash dividend of 54.08 cents per share is up 4% on the interim or half-year dividend, its total DPS for the full year was in fact 5.3% down on the prior full year. This is partly due to an equity raise in May last year and the dividend reinvestment plan (Drip) option to shareholders for its prior year’s results, which effectively increased the number of shares the fund has in issue. Nevertheless, the fund posted a strong operational performance which also shows that it has reduced its loan-to-value (LTV) ratio, from around 30% to 24.1%, and increased overall occupancies to above the 90% mark. Stor-Age’s stronger balance sheet position, compared to other JSE-listed property funds, also saw its net asset value (NAV) per share increase 13.7% by full-year end, from 1 119.29 cents to 1 272.8 cents.
Vukile’s (VKE) +7.8%
JSE-listed Vukile Property Fund has seen its operating profit for the full-year ending March 31, 2021 sliding by just over R830 million due to the pandemic-induced financial fallout last year. The real estate investment trust (Reit) that has a significant retail-focused presence in South Africa and Spain, reported in its latest results Sens statement on Wednesday that operating profit (before finance costs) decreased to R1 796 million, compared to R2 628 million for its prior financial year. While Vukile’s gross property revenue for the reporting period decreased by only around R300 million (from R3.4 billion in FY2020 to R3.1 billion), Covid-19 lockdowns and restrictions to trade saw the fund having to offer rental relief to hard-hit tenants totalling R467 million. Despite the hit, Vukile says that it is “very pleased” with the group’s overall operating performance and how it has “navigated the Covid-19 crisis” thus far. “Vukile remains in very good shape operationally and financially, and with a clear strategic focus, the group is well positioned for long-term growth,” it notes. Vukile says that it believes it has “the right platform and approach to restore profitability to pre-pandemic levels over the next few years”. This is compared to a full-year dividend of 129.02 cents per share for its prior financial year, ending March 2020. However, Vukile’s latest full-year dividend is based on a payout ratio of 79%. While the group has not provided guidance for its 2022 financial year due to ongoing Covid-19 uncertainty, it has flagged that it will reduce its payout ratio.
GameStop (GME) +0.9%
GameStop’s sales rose 25% in the fiscal first quarter, as the video game retailer embarks on a turnaround strategy partially fuelled by a Reddit-inspired stock rally. The company also named former Amazon executive Matt Furlong as its new CEO. Shares fell more than 12% in extended trading on Wednesday, after the company declined to provide an outlook for the year and said it may sell as many as 5 million shares. In the quarter, GameStop reported that its net loss narrowed to $66.8 million, or $1.01 per share, from a loss of $165.7 million, or $2.57 per share, a year earlier. Excluding items, the company had a loss of 45 cents per share. Analysts were expecting GameStop to report a loss of 84 cents per share, according to Refinitiv. Total revenue grew to $1.28 billion from $1.02 billion a year earlier, topping Wall Street’s expectations of $1.16 billion. The company declined to provide a forecast for the year. It said sales momentum continued into the second quarter, with total sales in May increasing about 27% compared with the same month a year ago. GameStop filed a prospectus with the Securities and Exchange Commission to sell up to 5 million shares of its stock from time to time, in “at-the-market” offerings. The funds it raises through these stock sales will be used for general corporate purposes, investing in growth initiatives and strengthening its balance sheet, the company said.
11 June 2021
1 listening min
Market in a minute - JSE slightly weaker again
In todays market in a minute, Andrew discusses the rands getting stronger on the back of encouraging power generation news. MercardoLibre climbing over 4% and Restoration Hardware surging 15%.
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