Spearrhead's focus on industrial, commercial and retail market will pay off

Posted On Tuesday, 16 November 2004 02:00 Published by
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The reaction from the investing public to Spearhead’s recent year end results, which showed a 17% rise in profits and a 13% increase in distributions per linked unit, was "extremely positive", says Mike Flax, Chief Executive Officer of Spearhead.

MIKE FLAX

The reaction from the investing public to Spearhead’s recent year end results, which showed a 17% rise in profits and a 13% increase in distributions per linked unit, was "extremely positive", says Mike Flax, Chief Executive Officer of Spearhead.

However, he says, this has caused him difficulties because investors and analysts are now hounding him for short and long term predictions for the company.

"There are few things CEOs dislike more than putting their heads on the block with long range forecasts – but as these are increasingly required by today’s investors, let me say that Spearhead should within the next two to three years be able to maintain its 10% annual growth record since listing and reach a point where its market capitalisation is close on R1 billion because we expect boosts from four main factors:

organic growth in the value of our properties, which under current conditions are appreciating at over 10% per annum;
an ongoing re-rating of the sector which will, again, raise our market capitalisation;
the acquisition of new properties, on which in the coming year we could spend R300 million – provided we can find good buys at the right price; and
the issue of new shares, R100 million of which could be made available in the coming year."
Flax said that Spearhead’s equal focus on the industrial, commercial and retail markets will pay off over the coming two or more years because, he believes, those sectors are entering a phase of sustained growth.

"I agree with those analysts who are talking of a triple whammy in the commercial and industrial markets, made up of strong rental growth, declining capitalisation rates and lower funding costs," said Flax. "These three factors, coupled to the general boost the economy is receiving from the lower interest rates, which in turn is resulting in a stronger demand for rental space, will make our portfolio increasingly valuable."

Asked to elaborate on Spearhead’s possible new acquisitions, Flax said that for these to become a reality "the price has always to be right".

"We need to get the message through to sellers that Spearhead only buys if the deal is fair to us. At this stage I would prefer, therefore, to give no hints or encouragement to sellers: if the property is not a good buy, we will not conclude a deal."

Recent purchases, some of which were mentioned in the company’s results published in September, have included Knowledge Park (R47 million), Maynard Plaza (R10 million) and Golf Air Park (R18 million).

For further information contact Mike Flax on 021 425 1000.


Publisher: Spearhead
Source: Spearhead

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