Our opinion on the current state of EMIRA(EMI)Emira Property (EMI) is a real estate investment trust (REIT) with substantial exposure to the South African economy through its office properties. It owns the prestigious Knightsbridge office park in Bryanston. Under the leadership of new CEO Geoff Jennett, the business has been consistently improving. The company has about R760m of overseas exposure, mostly to outdoor shopping malls in America, and a further R918m in Growthpoint Australia, but most of its exposure remains in South Africa. It owns 35% of Transcend, a South African residential fund, and has reduced its office exposure from 35.7% to 25%.
Emira is dependent on improvements in the South African economy. It recently reduced its holding of B- and C-grade offices by selling twenty-five of them to Shankly Property Investments (controlled by Sandile Zungu) for R1.8bn. This has freed up cash, which has been invested in retail shopping centres in America. On 23rd April 2021, the company announced that it had received a mandatory offer from Maitlantic (Pty) Ltd, and I Group Consolidated Holdings for the purchase of the balance of its listed shares as a result of its shareholding going above 35%. The offer is at 915c per share in cash, which is well below the company's net asset value (NAV).
In its results for the year to 31st March 2024, the company reported distributable earnings of R622.1m compared with R558m in the previous period. Headline earnings per share (HEPS) fell by 49.3%, and the company's net asset value (NAV) increased by 2.2% to 1733.1c per share. The company said, "The local portfolio has provided a robust operational performance, ahead of expectations. This can be attributed to continued enhancement of key metrics, specifically the reduction of vacancies and improved rent reversions."
Technically, the share appears to have entered a new upward trend in November 2023, but it is still early days. Given the company's substantial exposure to the South African economy and its recent strategic moves, Emira is positioning itself for potential growth. However, investors should keep an eye on the broader economic environment and the company's ability to maintain its operational improvements.
Investors should consider the following points:
1. Economic Dependency: Emira's performance is closely tied to the South African economy. Improvements in the local economy will likely benefit the company's performance.
2. Overseas Investments: The company's investments in American retail shopping centres and Growthpoint Australia provide some diversification, potentially reducing overall risk.
3. Operational Performance: The reduction in office exposure and improvement in key operational metrics are positive signs.
4. Share Price Trend: The share appears to be in a new upward trend, which could signal future growth opportunities.
Overall, Emira Property presents a potentially promising investment, especially if the South African economy continues to recover. However, careful monitoring of economic conditions and the company's strategic execution is advised.
