Our opinion on the current state of RDF

Redefine (RDF) is the second largest real estate investment trust in South Africa (after Growthpoint) with assets worth R72,9bn against a market capitalisation of R25,1bn. The company mainly holds industrial and office properties with investments in Poland, the UK and Australia. In our view, this is a massive REIT which has a large exposure to South African office space. It is very much impacted by developments in the South African economy and by the local political risk and especially the elections. However, it is stable and well-managed and trading well below the book value of its assets. Redefine announced that it would look to acquire a controlling interest in the Polish property company, EPP. In its results for the six months to 28th February 2023 the company reported revenue up 36,4% and headline earnings per share down 58%. The company's loan-to-value (LTV) was 40,9% and its net asset value (NAV) improved by 11,8% to 750,76c per share. The company said, "The retail portfolio showed improved trading densities and good letting activity underpinned by a general improvement in operating metrics. However, loadshedding and related costs are expected to impact on retail performance in the short term". In a pre-close update on 29th August 2023 the company said that occupancy was at 92,9% of gross lettable area (GLA). Technically, Redefine has been drifting down from the high of 1250c made in April 2015 to levels around 600c and then fell sharply to 159c with the advent of the pandemic. It has recovered, but has been drifting sideways and downwards since November 2021. It trades at about than 50% of its NAV. To us the share still looks oversold.