Transcript Slide 1
ABSA Asset Management Mariette Warner Listed Property Fund Manager Media Presentation 11 October 2012 Agenda The great historical story The major cycles Where we are now New listings Prospects going forward Relative Performance Compound Average Annual Returns to end 2011 and YTD Asset Class 1 Year 3 Years 5 Years 9 Years 2012 YT 30 Sept SA Listed Property Index 8.9% 17.2% 14.3% 25.0% 31.1% All Bond Index 8.8% 7.4% 8.6% 10.2% 13.0% STEFI Comp. Index 5.7% 7.3% 8.5% 8.6% 4.1% All Share Index 2.6% 17.3% 8.1% 18.1% 12.1% 2002 market cap R13 billion, market cap Oct 2012 R197 billion On a relative basis it has tripled in size from 1% to 3% of the ALSI. Source: Inet Bridge and ABAM The Major Cycles: Long Bond Yields and GDP Growth January 2003 to Sept 2012 Long bond yield range GDP growth range Long Bond Yields 10.0% to 6.9% 6.2% to -2.1% GDP Growth (constant prices) Source: Inet Bridge Property Rental Cycles Office Market Rental Trends (Quarterly Moving Average) Sandton A grade Sandton B grade Bryanston B grade Rivonia B grade Source: Rode’s Time Series and ABAM GDP Growth and Office Rentals Source: Inet Bridge and ABAM GDP Growth (LHS) Bryanston B Grade Office Rentals (RHS) Long Term Performance SA Listed Property Index (based to 100) • Falling bond yields • Weak earnings growth • Lower earnings growth • Falling bond yields • High real earnings growth • Global quest for yield • Volatile bond market Source: Inet Bridge and ABAM Real Earnings Growth 2007 - 2011 5 year cagr RES CPL HYP ACP GRT RDF FPT SYC OCT SAC Nominal 15.3 12.8 12.2 9.8 8.9 7.3 6.5 5.9 5.0 -2.3 Inflation 6.9 6.9 6.9 6.9 6.9 6.9 6.9 6.9 6.9 6.9 8.4 5.9 5.3 2.9 2.0 0.4 -0.4 -1.0 -1.9 -9.2 Real Source: Inet Bridge and ABAM Earnings Growth Impact Price Based to 100 (2007 – 8 Oct 2012) RES GRT SAC 220 177 90 Source: Inet Bridge and ABAM Divergent Growth – Ability to Forecast Earnings is Paramount Where we are Now Long bond yields are low The economy is sluggish Fundamentals in the property market are static Growth rates in income distributions from listed property portfolios have declined, but in line with inflation on average The quest for yield continues Volatile bonds and currency Inflation Cycle Real Bond Yields Source: Inet Bridge and ABAM Interest Rate Cycle Listed Property and Long Bond Yields Long bond yield Listed property: PUT Index SAPY Index Poor earnings growth Good earnings growth Source: Inet Bridge and ABAM The Earnings Cycle % Change in Income Distributions p.a. 1994 - 2011 Source: Inet Bridge Fountainhead Property Trust as a Proxy for the Sector 2012 Company Results Company Distribution Growth Company Distribution Growth Resilient +10.4% Capital +6.1% Octodec +9.5% SA Corporate +5.7% Hyprop +9.4% Fortress A +5.0% Sycom +6.4% Fountainhead +1.0% Growthpoint +6.1% Premium -1.0% Vukile +6.1% Emira -2.5% Acucap +6.1% Redefine Unbundling Source: Company publications Listed Property Index Year to Date Quest for Yield Continues to Drive Prices Listed Property Index (LHS) Long Bond Yield (RHS) New Listings Company Market Cap Rmill Listing Date Comment Investec Prop Fund 2,890 April 2011 3% ahead of forecast Rebosis 2,930 May 2011 4% below forecast Vunani 1,164 Aug 2011 3.5% ahead of forecast Dipula A & B 1,840 Aug 2011 In line with forecast Arrowhead A & B 1,675 Dec 2011 Too soon to analyse Synergy A & B 1,656 Dec 2011 Too soon to analyse Annuity 532 May 2012 Very recent listing Ascension A & B 802 June 2012 Very recent listing Source: Inet Bridge and Company Information Concentrated portfolios External management companies Small market caps Liquidity Maturity going forward will create opportunities Prospects and Investment Risks Forward yield of 6.8% is similar to 10 year bonds Growing income stream, given astute share selection Vacancies have stabilised Rising bond yields are negative for listed property prices Should outperform bonds over 12 months, so it has a place in a balanced portfolio Yield growing over time is better than cash Income dependent investors need to understand the capital volatility An entry point now needs a long term view