Fairvest beats inflation against with 8% distribution growth
However, the company is warning that its 2020 results could be hit by declining rental income
A Fairvest retail property in KwaZulu-Natal. Picture: SUPPLIEDFairvest, which focuses on shopping centres in smaller towns and rural areas, has once again beaten inflation with its 8.1% growth in distribution for the six months to end-June.On Thursday, the real-estate investment trust reported 8.7% growth in like-for-like net property income for the six-months to end-June, but warned that due to tough economic conditions, it was unlikely to meet its historic full-year target of distribution growth of between 8% and 10% in 2020.
Fairvest warned four large long-term leases that expire during 2020, with the company saying that it expected the rental would be reduced upon renewal or re-letting. As a result, it was expecting distribution growth to fall to between 4% and 6%.“Despite difficult economic conditions, the company remains confident that the nature of its portfolio, its low-risk tenant base and the company’s letting expertise will prove to be defensive in the face of economic headwinds, with growth in distributions per share approximating or exceeding current inflation,” the company said.
The company, which has a portfolio of 42 properties worth R3.16bn, saw its net asset value per share rise 0.7% to 229.38c per share during its first half. Revenue increased 21.1% to R490m.Headline earnings per share increased by 2.6% to 21.39c per share.
Fairvest had been in the news recently due to its mooted merger with low-income shopping centre focused peer Safari through a share swap. This deal was was called in August off after it became clear the deal had failed to get sufficient support from Safari's shareholders.
Fairvest's share price rose 5.46% to R1.93 at 12pm on Thursday. This pared its 2019 loss to 11.47%, while the JSE's property index had fallen 4.78% over the same period.The share price has, over the short term, lagged peers, possibly due to illiquidity and perception of the Fairvest and Safari merger that did not materialise, Catalyst Fund Managers investment manager Paul Duncan said.
“Over the long term, the share has outperformed peers and in my opinion, over the long term, likely to deliver quality, sustainable earnings growth in excess of inflation and the sector,” he said. Read more: Business Day »
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