Investec Australia Property Fund share price rally 6%

Posted On Monday, 08 December 2014 11:04 Published by
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Share price of Investec Australia Property Fund rallies 6% over the past six weeks as the rand hedge property stock continues to deliver on its growth promises. 

Graeme Katz

Management announced the acquisition of another two properties for A26.85m at a yield of 7.92%. The deal, which involves two industrial warehouses near Sydney and Newcastle, will see the fund's portfolio increase to 14 properties worth A281m.

CE Graeme Katz said the latest acquisition was consistent with the fund's strategy to grow and diversify assets by investing in well located, high-quality properties. When Investec Australia Property Fund listed in October last year it owned only eight office and industrial buildings worth less than A150m.

The fund is Investec's first JSE listed offshore property venture. South African property industry veterans Sam Leon and Sam Hackner, who have unlocked value for shareholders in SA-based Investec Property Fund since it listed in April 2011, are also behind the investment bank's foray into the Australian property market.

Offshore property has generally been a lucrative bet for South African investors this year, with the likes of Romanian-focused New Europe Property Investments and Rockcastle Global Real Estate Company delivering a total return of 43% and 55% respectively for the 10 months ended October.

That compares to the listed property sector's overall 22% total return over the same time, according to the latest figures from Catalyst Fund Managers. However, Investec Australia Property Fund did not quite live up to expectations, delivering a total return of less than 1% from January to October. The recent uplift in the share price is no doubt attributable to last month's release of a solid set of interim results and management's commitment to continue to bulk up the portfolio with earnings-enhancing acquisitions.

The company declared an interim distribution of 4.03c for the six months ended September, up nearly 18% from 3.42c in the previous comparable period. The company is trading at a forward dividend yield of more than 7%, compared with yields of less than 6% on offer from most of the JSE's other rand hedge property stocks.

Meago Asset Managers director Jay Padayatchi said that Investec Australia Property Fund was operationally sound. "The stock trades at an attractive forward yield with no gearing, with access to offmarket deals through the Investec network at cheap funding costs.'' However, he said investors in SA might be concerned about a potentially weaker Australian dollar against the rand.

"From a macroeconomic perspective, Australian unemployment levels are a lot higher than they have been for several years and there are increasing calls for the Australian reserve bank to cut rather than hike interest rates, which has resulted in local currency weakness.''

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