- Full year dividend forecast on track.
- Successful disposal of 100 smaller properties to Gemgrow.
- NAV growth of 23%.
- Defensive and diversified South African portfolio.
Arrowhead released its interim results today in line with guidance, despite a tough local economic and political environment. The company has declared a dividend of 43,24 cents per share, growth of 6,01%, for the six months ended 31 March 2017.
Arrowhead owns a portfolio of 51 retail, industrial and office properties. The portfolio is valued at R5,6 billion with an average value per property of R111 million as at 31 March 2017; more than double the average size of R49 million at the financial year ended September 2016. At the end of the reporting period, Arrowhead held 60% of Indluplace Properties, its JSE listed residential subsidiary with a market capitalisation of R2,4 billion and 55% of Gemgrow Properties. Gemgrow Properties, also Arrowheads’ subsidiary, is a high yield, high growth fund with a market capitalisation of R3,3 billion. Arrowhead owns 19% of Rebosis Property Fund as well as a 11% interest in Dipula Income Fund.
“Arrowhead is well diversified with properties across all nine provinces in South Africa and sectors, including residential. The company is a solid business and defensive investment with a proven track record over time, especially in the current challenging operating environment. Our performance is further supported with good growth through our investments in Indluplace and Gemgrow,” commented Mark Kaplan, CEO of Arrowhead.
Revenue increased to R959 million for the six months ended 31 March 2017 from R743 million at the end of the previous comparable period. The substantial increase in revenue is because of the Gemgrow transaction concluded during the period under review as well as annual escalations to existing leases.
“Acquisition opportunities have been limited due to the current macro-economic environment. The economic conditions also impacted the ability to implement acquisitions due to a misalignment of pricing expectations between vendors and acquirers. We have however found that the gap between vendors and acquirers have recently been narrowing, resulting in funding costs moving in the right direction. This has resulted in a potential acquisition pipeline particularly in Indluplace and Gemgrow”.
“Arrowhead has been prudent and our focused strategy of only acquiring properties on a yield enhancing basis has stood us in good stead,” remarked Imraan Suleman, CFO of Arrowhead.
The company’s loan to value ratio remains conservative at 27,8% as at 31 March 2017. Interest rates on 86% of total borrowings are fixed.
Riaz Kader, COO of Arrowhead, concluded, “We remain focused on sweating our current portfolio and are pleased to have been able to achieve satisfactory performance from our properties. We are on track to meet our dividend forecast for the year ending 30 September 2017.”