Fund managers say one of the reasons for Hospitality's performance has been confidence in the management of the company and its quality property portfolio.
Hospitality is SA's first specialised listed property fund that is invested exclusively in hotels and resorts. They say investors' perceptions of Acc-Ross's higher risk, as well as a lack of institutional shareholding in Acc Ross, have contributed to the volatile performance of its shares.
Acc-Ross is a golf estate, residential and leisure-property development group.
The combined linked unit price of Hospitality surged more than 20% after it listed on the JSE?s main board at R10 for each linked unit.
On the first day, Hospitality's A linked units surged 25% to reach a high of R12,50. They closed at R12,40, a 24% increase on the linked unit price at listing.
The company's B linked units also surged 25% to a high of R12,50 and later closed at R11,80, an 18% increase on the linked unit price at listing. Since then Hospitality?s A linked units have consistently traded strongly, in the R12,90 price range.
On Friday and Monday the unit price closed at R12,90. The unit price was at R13 at 4pm on Tuesday. The Hospitality B units have faired well, closing at R12,20 on Friday and Monday. They traded at R12,30 at 4pm on Tuesday.
Acc-Ross has faired less well, with its share price plunging 50% in value from R1 to 50c soon after listing on Thursday.
On Friday more than 500000 shares were traded at prices ranging from 104c to 140c, with the stock closing at 101c.
The high of 140c was 20% more than the initial listing price.
But on Monday Acc-Ross closed at 70c - a significant drop from its listing price. By 4pm on Tuesday it had recovered to 80c.
Mariette Warner, head of property funds at Stanlib Asset Management, said the risks of Acc-Ross and Hospitality were "very different". "The perception of risk by investors would vary greatly with a company like Acc Ross - hence the high degree of volatility," said Warner.
But as far as Hospitality was concerned, she said that because there were "leases involved", the risk on cash flow was low.
Another reason for market confidence in Hospitality was the quality of its management.
Bruce Hutchison, a former Africa regional director of Sol Kerzner's One&Only luxury resort group, is CEO of Hospitality.
Grapnel Property Group, which conceptualised the listing of Hospitality, is also well known in property industry circles for its management of blue-chip listed property unit trust Sycom.
Colin Young, head of asset management at Old Mutual Properties, said Hospitality was a "credible player", had gone on two road shows and had structured the company attractively in terms of A and B units.
Young said Hospitality had brought on board international consultants Horwath Tourism & Leisure Consulting, which co runs the fund?s business with Grapnel. He said Hospitality also had a good property portfolio.
Young said Acc-Ross was too small and had "never tried to attract institutional shareholders".
"If you have solid shareholders like institutions, who are in there for a while, it creates stability," he said.
Michelle Krastanov of Arcay Corporate Services, the designated advisers to Acc-Ross, said property development was "normally a risky business" because a lot of money was spent up front in getting development rights in place.
Krastanov said Acc-Ross had "taken a lot of the risk out by already having rights in place".
She said that on listing Acc Ross had all its rights in place.
Acc-Ross had presales that consisted of 10% deposit and 90% preapproved finance, Krastanov said. She said at the time of listing there were R700 million worth of presales on four different development projects. "We are projecting just over R1 billion of sales in 2007."
I-Net Bridge
Publisher: I-Net Bridge
Source: I-Net Bridge
