Our opinion on the current state of HYPROP(HYP)Hyprop (HYP) is a leading property real estate investment trust (REIT) that focuses on high-quality shopping malls in South Africa, with additional interests in Eastern Europe and Africa to the North. Some of the country's most iconic shopping malls, such as Rosebank, Canal Walk, Hyde Park, and Clearwater, are part of Hyprop's portfolio. The company has been affected by a decline in consumer spending, which has led to lower trading densities in its malls.
Despite these challenges, Hyprop is currently trading at close to half its net asset value (NAV) of R63.39, making it an attractive buying opportunity in our view. The company's new CEO, Morne Wilken, is exploring innovative ways to attract customers back to its malls, including building rooftop gardens and offering shared workspaces.
In its financial results for the year ending 30th June 2024, Hyprop reported a 6.1% increase in net operating income, but distributable income per share fell by 8.6%. The company's net asset value (NAV) dropped by 4.8% to 6032c per share, while its loan-to-value (LTV) ratio remained stable at 36.4%. Hyprop also highlighted its strong liquidity position, with R803 million in cash and R2 billion in available bank facilities. The company has also been reducing its euro-denominated borrowings as part of its debt reduction strategy and raised R500 million in new capital through the FY2023 dividend reinvestment plan (DRIP).
Technically, the share found support at 2562c in November 2023 and has been on the rise since then, despite setbacks such as its exposure to Pick 'n Pay stores. Pick 'n Pay, which serves as an anchor tenant in many of Hyprop's shopping malls, has plans to close up to 40 underperforming stores, which presents a concern for the company.
Nevertheless, with Hyprop trading well below its NAV and at a price-to-earnings (P/E) ratio of 14.48, we still see it as a buying opportunity. It was added to the Winning Shares List (WSL) on 15th August 2024 at 3439c per share and has since increased to 4558c, representing a 32% gain in just over one month.
On 23rd September 2024, Hyprop announced the sale of its interests in Nigeria and Ghana for a combined value of just over R1 billion. This sale will further strengthen the company's balance sheet, positioning it well for future growth.
