Namibian Listed PLS Oryx Properties delivers strong returns to investors

Oryx gazella in the Namib (Image credit: Wikipedia)

On 21 August 2015, Oryx Properties Limited, a listed commercial property investment company with its primary listing on the Namibian Stock Exchange, declared distributions to its unitholders of N$104.7m, representing an increase of 7.1% over the previous year. The distributions declared equate to 86.75 cents per linked unit for the six months to 30 June 2015, a 7.4% improvement over the 80.75 cents per linked unit declared for the comparative period. The total distribution to unitholders for the year amounts to 158.50 cents per unit. Revenue on a cash flow basis grew by 31.8% (2014: 31.0%) and is underpinned by strong renewals from existing tenants and continued high occupancy levels. The current financial year also includes a full year of revenue generated by the additional lettable area from the Maerua Mall expansion project, which was completed during April 2014, and the Gustav Voigts Centre acquired with effect from 1 November 2013.

Approximately N$6m was spent to convert the electricity supplies at both Maerua Mall and Baines Shopping Centres to bulk supply, which has resulted in an overall reduction in electricity expenses. As a further drive to reduce electricity expenses, Oryx embarked on an N$20m roof top solar panel project. The panels are being installed on the Maerua Mall Shopping Centre roof and will generate approximately 1 800 MWh electricity per annum. This will bring a welcome relief to the pressure currently experienced by the national electricity grid. With this project Oryx took a giant leap in aiding a whole range of economic and environmental challenges.

At year end the property portfolio was valued by Broll Valuation and Advisory Services at N$2.2bn (2014: N$2.0bn), which resulted in a fair value adjustment of N$182.7m (2014: N$104.3m). According to Chief Executive Officer Stefan de Bruin, this adjustment resulted in the net asset value per linked unit increasing by 16.6% (2014: 10.8%) from 1 643 cents per unit in 2014 to 1 915 cents per unit in the current year. The capital invested in the retail portfolio has produced good income and capital growth. Positive renewals and property rentals as well as the upward growth in industrial property rentals have also contributed to this growth.

For the 2015 financial year Oryx has managed to produce an 18.2% total return for investors, which consists of the growth in market value of the linked units and distributions paid during the year.

The financial year closed with a gearing ratio of 38.8% (2014: 40.5%). Approximately 46% of the interest rate exposure is fixed via swap transactions. During the year Oryx registered a N$500m domestic medium term note program in order to provide additional future funding options for the development pipeline. A rights issue to re-capitalise Oryx is well under way and was approved by the unitholders on 4 August 2015. Unitholders will have the option to take up one additional linked unit for every five linked units held. The capital thus raised will create additional investment capacity and reduce the gearing ratio to approximately 30%, thereby reducing Oryx’s exposure to the impact of possible interest rate hikes. It is also expected that the increase in the number of linked units will stimulate liquidity and consequently the market price of the linked units.

The overall objective of Oryx remains to build a high quality, low-risk property portfolio, capable of delivering a dependable, sustainable and growing income stream. The operating environment remains challenging for the year ahead, as there is increased competition in the retail property sector. This, coupled with pressure on disposable income and muted economic growth, mainly as a result of a slowdown in the world economy, and the resultant decrease of resource prices internationally, may result in weaker property fundamentals. The Board is confident that the defensive nature of the Oryx property portfolio will continue to deliver unitholder value and distribution growth. Oryx will concentrate on tenant retention, maintaining the high occupancy level and rigorous cost control.

The cost of debt is on the increase, but the plans to re-capitalise the Group with the rights issue during October 2015 will mitigate this risk and will allow Oryx to move forward with its exciting development pipeline, which is ready to be rolled out.

Oryx Properties Limited, a Namibian Listed PLS with a R2.2bn property portfolio in Namibia and South Africa.