Closing in on Top 40 target

Posted On Thursday, 14 June 2007 02:00 Published by eProp Commercial Property News
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Growthpoint Properties' phenomenal expansion path continues. In 2001 it owned all of nine buildings worth R100m. Six years on it has 427 properties in its portfolio, worth a hefty R20bn.

Norbert SasseGrowthpoint's recent R1,57bn acquisition of Investec Property Group's (IPG) management company paves the way for its inclusion on the JSE's Alsi Top 40 index. The deal will become effective on 1 July, raising Growthpoint's market cap to more than R19bn.

That places Growthpoint way ahead of its peers in terms of size and liquidity, with the market cap of the sector's next biggest contenders - ApexHi, Grayprop and SA Corporate - still at less than R10bn.

Growthpoint CEO Norbert Sasse says the company is now approaching its long expressed target of a Top 40 inclusion.

Though not quite there yet, Growthpoint is sitting on committed (but pending) deals worth another R3,5bn to R4,5bn that will no doubt help push it on to the index. A Top 40 inclusion will lure new investors and create further share price upside, as tracker funds that don't yet hold Growthpoint shares will be required to do so.

But back to the IPG deal.

Though Growthpoint has always been managed (externally) by Investec, the transaction effectively means that it now becomes an internally managed fund.

The move is in line with global trends, with international investors increasingly favouring the internal management model to avoid potential conflicts of interest.

The acquisition will also have significant cost savings - R145m/year - that will flow directly to shareholders. Macquarie First South Securities property analyst Leon Allison expects the IPG transaction to boost distributions by 2,6% in the year to end-June 2008, raising payouts to 108,7c/share (15,9% growth).

Allison has also upgraded his distribution growth forecast for financial year 2009 from 11,4% to 12,1% due to further anticipated cost savings (inter-group costs). Says Allison: "Investors buying Growthpoint now are getting superior growth at lower risk than the sector average yet paying close to the same rating.''

He forecasts total returns of 27% for Growthpoint over the next 12 months, more than double the expected sector average of 11%.

Last modified on Thursday, 24 April 2014 13:07

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