Rebosis aims for rerating expansion

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South African and international institutional investors have been campaigning for large, liquid property stocks. These companies often have higher ratings, meaning they trade at higher price earnings (p:e) multiples and at lower yields. Ngebulana said in an interview this week he would like Rebosis to trade at a higher p:e and a lower yield.

Ngebulana, who launched Rebosis - the first majority black-owned and black-managed property fund to list in SA - said he would also consider a separate listing of the Billion Group, which is a development company he founded. Rebosis is finalising a transaction to take over Billion in a deal worth close to R5bn.

"I have thought of listing Billion as a separate development fund. It would just need to be done at the appropriate time, when it is large enough and market conditions strong enough. In the past two years, many development-focused funds have struggled. They were too small at listing and economic conditions have been weak," he said.

"We are taking steps to create conditions which may lead to the rerating of Rebosis's share price. This includes internalising our asset management, which we are doing through the Billion deal. We are also lowering our exposure to government tenants as the market tends not to favour these," Ngebulana said.

"By becoming a larger fund and by being better rated, we can maintain our position in the South African property index (FTSE/JSE SA Listed Property index). We can also be included in global indices," he said.

In terms of the deal with Billion, Rebosis will acquire Baywest City shopping centre, which is the largest mall in the Eastern Cape, and Forest Hill City, a mall in Centurion. It will also acquire Billion Asset Management and Billion Property Services. Through the deal, Rebosis will gain significant scale and liquidity. It will increase its bias towards retail property, becoming about 80% retail.

Ngebulana said there was strong support from about 70% of Rebosis's shareholders for the Billion deal to go ahead.

Rebosis listed five years ago with R3.6bn worth of assets. Among its flagship assets are Hemingways Mall and Mdantsane City in the East London area. It also owns a controlling stake in UK mall owner New Frontier Properties.

Following the Billion deal, Rebosis would own assets worth about R17bn. Its market capitalisation would also grow close to R8bn.

Chief investment officer at Grindrod Asset Management, Ian Anderson, said one could not accurately predict when any rerating would occur.

"Rebosis are banking on the fact they'll be larger, more liquid and safe from exclusion from the South African Property index, as well as owning a retail-focused fund. Typically, both of these characteristics command a premium rating although the magnitude of that premium rating varies between companies and, in some instances, doesn't exist at all," he said.

Evan Robins, the listed property manager of Old Mutual Investment Group's MacroSolutions boutique, said the takeover of Billion would be transformative for Rebosis.

"The proposed deal will change the nature of the fund considerably," he said.

Source: Business Day