Our opinion on the current state of DIPULA-B(DIB)Dipula is a real estate investment trust (REIT) with a diversified portfolio, predominantly made up of retail, office, and industrial properties valued at approximately R9 billion. The majority of its properties are located in Gauteng, but it also has holdings across other South African provinces. The company has a selective investment strategy in residential rental properties as well.
The restructuring of Dipula's share structure in June 2022, where all the Dipula A-shares were repurchased in exchange for the issue of 2.4 Dipula B-shares per A-share, has streamlined its equity structure, potentially making it more attractive to investors. This simplification should reduce complexities and create a clearer value proposition for shareholders.
In its financial results for the year ending 31st August 2024, Dipula reported a revenue increase of 7% to R1.5 billion, despite challenges such as negative rent reversions in its government-tenanted office portfolio and revenue losses from previous property disposals. The company's tenant retention rate was a solid 87%, with net property income up by 2%. However, property-related expenses rose by 15%, amounting to R553 million, which put some pressure on its overall performance.
The company maintains a loan-to-value (LTV) ratio of 35.7%, which is relatively healthy for a REIT, indicating a moderate level of debt. The stock is currently trading at approximately 72% of its net asset value (NAV), suggesting that it may be undervalued by the market.
Despite the current economic challenges in South Africa, Dipula's simplified share structure, diversified property portfolio, and strong tenant retention rate position it well for future growth. However, the thin trading volume of its "B" shares could be a concern for private investors looking for liquidity. Nonetheless, with the restructuring and continued focus on optimizing its portfolio, the company is poised to perform better in the medium to long term.
