Redefine, the highest-yielding stock in the property sector, is the result of a reverse takeover last summer. Redefine, a fund of pan-European retail assets and hotels backed by a big South African real estate company, reversed into Wichford, a portfolio of high-yielding offices mainly let to the UK government.
The merged entity is still in a process of transition. Over the coming months it will raise equity in a fund-raising backed by the South African parent to pay off two huge securitised debt packages inherited from Wichford. As part of the deal it will also sell off over £100m of offices. The company that emerges should look healthy, with a more sustainable loan-to-value ratio of just over 60 per cent, compared with 79 per cent today.
But the short-term picture for property valuations isn’t pretty. Investor sentiment towards both regional offices and retail units has deteriorated rapidly since the debt markets froze over again last August. The company’s valuers wrote down the old Wichford portfolio by 9.2 per cent even as its rental income, which is linked to inflation, increased. The UK retail portfolio was also written down 4.1 per cent because shopping-centre rents are falling. Occupancy is nonetheless holding up reasonably well, at 95 per cent in both portfolios, and earnings available for distribution increased 10 per cent to 2.23p a share.
Brokerage Peel Hunt expects flat full-year EPS of 4p and an EPRA NAV of 41p.
REDEFINE INTERNATIONAL (RDI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 32.5p | MARKET VALUE: | £188m | |
| TOUCH: | 32-33p | 12-MONTH HIGH: | 53p | LOW: 32p |
| DIVIDEND YIELD: | 12.9% | TRADING PROP: | £109m | |
| DISCOUNT TO NAV: | 13% | |||
| INVESTMENT PROP: | £805m | NET DEBT: | 379% | |
| Half-year to 29 Feb | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 52 | 9.5 | 2.3 | 2.03 |
| 2012 | 37 | -61.4 | -10.7 | 2.10 |
| % change | -29 | - | - | +3 |
Ex-div: 9 May Payment: 24 May | ||||
