Our opinion on the current state of SAC

SA Corp (SAC) owns a group of 199 industrial, retail, storage, residential and office properties in South Africa plus a 50% stake in a joint venture in Zambia with 3 properties. The bulk of this portfolio is in retail (43%) and industrial (28%). The company has problems across its portfolio, and especially in its office and industrial properties where it has been experiencing negative rental reversions. Obviously, it is exposed to the poor economic conditions facing South Africa at the moment. Various offers have been made to buy out the company which have been rejected by the board. The new (and returning) CEO, Rory Mackey, plans to turn the company around over the next year - by getting it out of the office market and concentrating on residential and retail portfolio. On 15th March 2023 the company announced that it had made a firm offer to acquire the entire issued share capital of Indluplace (ILU) for R3.40 per share which would result in the delisting of that company. In its results for the six months to 30th June 2023 the company reported revenue of R1,1bn compared with R972,5m in the previous period. Headline earnings per share (HEPS) fell to 14,29c from the 17,55c in in the previous period. The company's net asset value rose slightly to 417c per share. The company said, "Interim Distributable Income R318.2 million or 12.65 cps down 12.2% vs six months to 30 June 2022 (2022 H1) up 1.8% vs six months to 31 December 2022 (2022 H2) (2022 H1: R362.3 million or 14.41 cps) (2022 H2: R312.5 million or 12.42 cps) Total net property income (NPI) of R592.6 million (2022 H1: R594.8 million) (2022 H2: R577.8 million)." In a pre-close update for the year to 31st December 2023 the company said, "The net effect of loadshedding, being unrecovered loadshedding expenses is forecast to be R2.2m for the LFL portfolio. Whilst average residential vacancies improved by 0.9% in 2023, the cost of diesel associated with loadshedding for generators introduced to the residential portfolio in late 2022 only of R6.5m, and the capping of student rental by NSFAS, the LFL NPI growth would have been forecast to be 7.2%." On 15th March 2023, SA Corp made an offer for the entire issued share capital of Indluplace (ILU) at R3,40 per share. On 18th July 2023 the Induplace announced that the deal had been approved and so we expect ILU to be delisted in due course. Technically, the share is in an upward trend and should continue to perform well.