Tuesday, 30 April 2013 - 20:00
The Argument for Property
Property is an asset class that most people seem to have an opinion about! Specific experience with property is usually the major determinant in how it’s viewed, and it’s almost impossible to change someone’s thinking...
As multi managers at Seed, part of our job is to determine whether to over or underweight the various asset classes – listed property included – using a variety of indicators to help us determine the intrinsic value of each asset class. It is also interesting to compare our views to those of other asset managers.
For a while now, larger managers have generally been negative on the prospects of listed property going forward, citing excellent multiyear performance coupled with low yields (and a low reference bond yield) and poor growth prospects relative to history. While we agree to a certain degree with this sentiment, we couldn’t help but dig a little deeper.
An asset manager with R200bn in asset allocation mandates (this is the case with at least a couple of managers, but could very well be the case for a few more) that wants to make a sizeable investment into local property (i.e. a 10% position) would need to purchase more than 10% of the local property market! Listed property’s total market capitalisation sits at just over R180bn, so by virtue of their significant assets under management, the local property market becomes largely un-investable to the major asset managers. Seed has just over R1bn of assets under management, and we are therefore able to make a significant investment into all asset classes should they show value (including listed property).
In the case of listed property we do agree that there are risks, particularly if interest rates start to creep up and/or bond yields start to climb, but feel that the opportunities available to investors currently outweigh the negatives. When looking at the yield relative to history, investors are currently receiving slightly in excess of the average yield over the past 9 years (since inception of the SA Listed Property Index – J253). The expectations for growth in yield are much lower than they were in the early 2000’s, but in a low yield environment we are happy with an above inflation initial yield coupled with increases in line with inflation.
Another key valuation point is the relative yield that one can earn on an asset class versus another, compared its historic relationship. The charts below show how property’s yield is currently attractive when compared to the yield one can earn on equity or bonds.
The above charts show that while property isn’t currently a screaming buy when looking purely at valuations, it is preferable to other local assets. A further tailwind for property is the imminent implementation of REIT legislation in South Africa that will bring legislation in line with global property markets and make our property companies more attractive to foreigners. The foreign ownership percentage of property shares is currently much lower than both the local equity and bond markets, and we feel that there will be a larger demand on our property companies going forward.
At Seed we are taking advantage of this opportunity by having a 13% allocation to property in our house view Seed Flexible Fund. This allocation has most definitely added to performance over the past year.
For any questions on our Funds, please feel free to contact us or visit our website directly www.seedinvestments.co.za.
021 914 4966
Tue, 30 Apr 2013
At midday on Monday the JSE All Share had fallen 0.25%, as tumbling gold mining shares weighed on the local bourse.
Operating loss narrowed to USD6.5 million (2011: loss of USD14.4 million). Loss attributable to equity holders of the parent fell to USD4.5 million (2011: loss of USD16.1 million), while headline loss per share dropped to USD0.29cps (2011: loss of USD1.01cps).
No dividends wer
World Markets (Spot Prices)
|JSE Top 40||17:00||34068.00||-295.00||-0.86%|
|JSE Indust 25||17:00||42692.29||-196.00||-0.46%|
|Rand / Dollar||19:58||8.9802||-0.0060||-0.07%|
|Rand / Pound||19:55||13.9168||0.0273||0.20%|
|Rand / Euro||19:55||11.8088||0.0441||0.37%|
|Rand / NZD||19:58||7.6964||0.0060||0.08%|
|Rand / AUD||19:55||9.3053||0.0070||0.08%|
|Yen / Dollar||19:57||97.5680||-0.2800||-0.29%|
|Euro / Dollar||19:58||0.7601||-0.0038||-0.50%|
|Dollar / Euro||19:58||1.3155||0.0063||0.48%|
|Pound / Dollar||19:55||0.6435||-0.0016||-0.25%|
Click here for the Sharenet Spot Price page
The JSE Today
* Includes all listed instruments on the JSE
|Index Name||RP||Move||% Move|
|Financial & Ind. 30||46,231.00||-128.00||-0.28%|
|Oil & Gas ||29,348.00||-148.00||-0.50%|
|Oil & Gas Producers ||15,780.00||-79.00||-0.50%|
|Basic Materials ||23,689.00||-547.00||-2.26%|
|Forestry & Paper ||20,721.00||-66.00||-0.32%|
|Industrial Metals ||23,456.00||78.00||0.33%|
|General Industrials ||119.00||.00||0.44%|
|Consumer Goods ||46,453.00||-271.00||-0.58%|
|Automobiles & Parts ||7,583.00||-92.00||-1.20%|
|Health Care ||62,551.00||309.00||0.50%|
|Index Name||RP||Move||% Move|
|Food Producers ||67,935.00||271.00||0.40%|
|Personal Goods ||719.00||-7.00||-1.07%|
|Consumer Services ||81,648.00||90.00||0.11%|
|General Retailers ||62,593.00||-225.00||-0.36%|
|Travel & Leisure ||5,641.00||-68.00||-1.20%|
|Support Services ||2,310.00||-41.00||-1.78%|
|Non-life Insurance ||44,970.00||-1862.00||-3.98%|
|Life Insurance ||28,509.00||80.00||0.28%|
|General Financial ||2,828.00||15.00||0.53%|
|SHARIAH TOP40 ||3,099.00||-50||-1.62%|
|FTSE/JSE SHARIAH ALL||3,249.00||-48||-1.47%|
|FTSE JSE Fledgling ||5,894.00||-11||-0.19%|
|FTSE/JSE Alt X ||948.00||-23||-2.42%|
|SA LISTED PROPERTY ||566.00||0.52%|
|CAPPED PROPERTY ||452.00||0.73%|
|FTSE/JSE RAFI 40||7,759.00||-75||-0.97%|
|Capped Top 40||18,021.00||-146||-0.80%|
|Capped All Share||19,637.00||-141||-0.71%|
|JSE TABACO ||6,351.00||-43||-0.67%|
Click here for the Sharenet Index Summary page
Latest Consensus Changes**
|BIL||BHP BILLITON PLC||BUY||29/04/2013|
|CLS||CLICKS GROUP LTD||SELL||26/04/2013|
|SUI||SUN INTERNATIONAL LTD||HOLD||26/04/2013|
|HAR||HARMONY GOLD MINING COMPA...||HOLD||26/04/2013||
|Expected||Company Name||Fin. Date|
|03/05/2013||BIOSCI||December 2013 (Interim)|
|03/05/2013||HARMONY||March 2013 (Q)|
|03/05/2013||HARMONY-P||March 2013 (Q)|
|03/05/2013||HWANGE||December 2012 (Final)|
|03/05/2013||HWANGE-A||December 2012 (Final)|
|NTC PREF||02/04/2013||25/04/2013||06/05/2013||R 3.4966|
|BEL||Bell Equipment Ltd.||30/04/2013||Confirmed|
|PAM||Palabora Mining Company Ltd.||30/04/2013||Confirmed|
|PAMCD||Palabora Mining Company Ltd.||30/04/2013||Confirmed|
|GGM||Goliath Gold Mining Ltd.||30/04/2013||Confirmed|
|ABSP||Absa Bank Ltd.||02/05/2013||Confirmed||
Stock Exchange News Service
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