Hyprop

23 November 2020 By PDSNET

Property shares on the JSE have had a torrid time over the last few years. It began with the melt-down which resulted from the Resilient crisis, now substantially behind us, and continued with the eventual failure of the Edcon Group and the effects of the COVID-19 lockdown. These events have combined with a generally negative economy to reduce the value of property shares significantly.

Hyprop traded as high as R141 per share on 15th August 2016, but fell to a low of less than R15 in April 2020. It has now recovered somewhat to levels around R28 – but that is a massive discount to its net asset value (NAV) per share of R76. In our view, this represents an opportunity for private investors to acquire really good quality assets at a fraction of their true value.

Hyprop is a real estate investment trust (REIT) which owns a number of well-known high-end shopping malls in South Africa such as Canal Walk, The Rosebank Mall, Clearwater Mall, Woodlands and Hyde Park Corner. Altogether its portfolio is worth R48,5bn after impairing the value of its assets by R4bn during the year to 30th June 2020.

Debt was reduced by R1,2bn during the year, but with the impairments, the loan-to-value ratio worsened to around 50%. This is somewhat higher than investors would usually want, but the company has met all banking covenants as at 30th June 2020 and is financially stable. Further impairments seem unlikely – in fact, the value of Hyprop’s properties will almost certainly appreciate as the South African economy recovers and shoppers return to the malls.

One of the major problems which it had was its exposure to the Edcon Group, now in liquidation. That exposure was through Edgars, Jet and CNA which had stores in a number of its malls. That exposure has been reduced and new terms agreed with the new owners of Edgars, CNA and Jet.

The company has also reduced its exposure to sub-Saharan Africa by selling its Ikeja City Mall, Achimota Retail Centre and Manda Hill Shopping Centre.

Technically the share made a high of R141 in August 2016 and then entered a long downtrend. Our advice to investors was always to wait for a convincing break up through the 200-day simple moving average (200-day MA). That upside break has now occurred, and we believe that the share has entered a new upward trend. Consider the chart:

Hyprop: June 2018-to date. (21 November 2020). Chart by ShareFriend Pro.

You can see here the steady downward trend in the share’s price since 2018 which culminated in a collapse due to the COVID-19 pandemic. That was followed by a protracted sideways market, or “island formation”. That island formation has now been broken to the upside with the share climbing above its 200-day MA.

As a private investor you should take note of the way that the 200-day MA kept you out of the share during its long sideways market between March and October this year. Now that the buy signal has been given and confirmed we expect the share to continue on a steady recovery towards at least its NAV and probably well beyond. So, this is a rare opportunity to acquire these excellent assets at a bargain price.


DISCLAIMER

All information and data contained within the PDSnet Articles is for informational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet Articles are based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any comment or opinion for any reason.



Share this article:

PDSNET ARTICLES

Truworths

Truworths (TRU) is a retailer of fashionware in South Africa and the UK. As such its business has been damaged by the impact of Brexit in the UK and the recessionary conditions in the South African economy. Both countries have then been impacted by lockdowns which prevented in-store sales for a period of time, beginning in late March 2020. The second wave of the pandemic has also been a factor. In the UK,

The Coming Blow-off

At the start of 2021, it is as well to stand back and consider the context of where world markets are as they slavishly follow Wall Street up to new record highs.  Consider the 12-year chart of the S&P500:

 
The chart shows that the great bull market which began in March 2009 is on-going. It is moving within a clearly defined channel.

Window Dressing

We all know that our market, the JSE, is dominated by the big institutions – the pension funds, unit trusts, insurance companies and a scattering of large fund managers. These institutions together account for at least 90% of the trades on the JSE by value. We private investors make up the rest.
Big institutions have huge holdings of mostly blue-chip or

The Rand Bull

For some years now we have believed that the rand was underpriced in relation to the currencies of first world countries, especially the US dollar. We have also said that the rand, as one of the most heavily traded emerging market currencies, is a barometer of the international investment community’s perception of risk in the world economy. When investors

Start an Investment Club

A few years ago, we developed software to manage an in-house investment club for our staff members. We now offer it to any member of the public who wants to set up an investment club, free of charge. Using the daily closing prices from the JSE, this software is designed to keep track of the investments of a group of people who have decided to work together on investing directly

The Confidential Report - December 2020

We have come to the end of a tumultuous and unique year marked by the “black swan” event of COVID-19, various Trump excesses and, finally, his vanquishing. The long-term progress of the S&P500 as outlined in “our Background Approach” on our web site remains in tact. In that scenario, the world economy is moving into a strong boom phase stimulated by unprecedented

Market Overview

Now that the uncertainty of the US election is essentially over, it is perhaps a good time to step back and consider where we are and what is likely to happen next.

The S&P500 index, which is an excellent benchmark for trends in the international markets, appears to be breaking to a new record high – above the resistance at 3580. Consider the chart:

Insider Trading

The JSE has just witnessed one of the most blatant examples of insider trading in many decades. It involved a small real estate investment trust (REIT) called Texton. This company owns 53 properties, 56% of which are in South Africa and the balance in the UK. After it listed on the JSE in August 2011, the share rose to a high of 1235c on 6th March 2015 before beginning a steady

The Confidential Report - November 2020

America
At the close of trade on Friday (30-10-20), the S&P500 index was down 7,5% from its cycle high of 3534 made on the 12th October 2020 – and this puts the market on a knife-edge. Consider the chart:

The critical level from a technical perspective is the previous cycle low of