Our opinion on the current state of EQU

Equites (EQU) is the only real estate investment trust (REIT) on the JSE which specialises in industrial logistics and distribution properties in South Africa and the UK. It has about R12bn worth of assets in South Africa and R7,4bn worth in the UK. Its most recent acquisition of a 100 000 square meter logistics property in Germiston was expensive, but it has an A-grade tenant in the form of Simba and a good yield which will make the property highly profitable in years to come. The property was bought from Investec Asset Management for R462m. Of all property REITs, those which include logistics properties like warehousing are the most sought-after because of the steady increase in online shopping by consumers. CEO, Andrea Taverna-Turisan says "...a wall of cash is leaving retail property and going to logistics". Equites has achieved a return of just under 25% per annum since it listed. In its results for the year to 28th February 2023 the company reported dividends per share (DPS) up 4,1% and a loan-to-value (LTV) of 39,7%. The company's net asset value (NAV) decreased by 10,5% to 1665c per share. Headline earnings per share (HEPS) increased by 20,8%. The company said, "Due to a sharp increase in interest rates during the second half of the year, the UK logistics property market experienced cap rate expansion, with prime logistics yields shifting outwards by 175bp from 3.25% to 5.00%". In a trading statement for the six months to 31st August 2023 the company estimated that the interim dividend would be 19,9% lower than in the previous period due to "...the exclusion of income from cross-currency interest rate swaps from distributable earnings and the higher interest rate environment". Technically, Equites saw its share price move sideways for two years before falling in response to COVID-19. Since March 2020 the share rose steadily until the beginning of 2022 but has since been declining. We believe that Equites represents good value at the current price. We regard this as one of the better property shares available on the JSE.