Analyst tips PIC offer to lift CBS Property Group

Posted On Tuesday, 12 June 2007 02:00 Published by eProp Commercial Property News
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Listed property company could benefit from longer-term returns in the retail sector if the Public Investment Corporation's proposed R2,3bn bid goes ahead

Angelique de RauvilleListed property company CBS Property Group could benefit from longer-term returns in the retail sector if the Public Investment Corporation's (PIC's) proposed R2,3bn bid goes ahead, an analyst said on Monday.

The PIC has offered CBS shareholders R12 for every one CBS linked unit and the property firm has said it would also pay out a special distribution.

CBS financial director Sean Mackay said the offer was being considered by the Competition Tribunal and an announcement would be made within the next few weeks, after which shareholders would vote on the offer.

CBS, which reported a 25% increase in distribution growth for the six months to April, had grown "nicely" in the past few years and had a few acquisitions in mind for the rest of the year, said Mackay.

The company reported gross revenue of R128m from R70m and basic earnings per share were up from 0,9c to 7,5c.

It more than doubled its total assets to R2,4bn, and took its market capitalisation to more than R2bn. In the first half of the year, it acquired two prime A-grade office and warehouse buildings for R303m. However, while it had a "decent" portfolio of commercial property, it was finding it difficult to acquire retail space, which had a lower yield, said Mackay.

Angelique de Rauville, MD of Investec Listed Property Investments, said retail was the best-performing asset class over the long term, while industrial stock would outperform in the short term.

Despite an increase in interest rates, retail property was still able to attract premium rates and there was still strong demand for retail, which Investec did not see abating.

Mackay said if the PIC offer was accepted, CBS would continue with its strategy of acquiring good-yield property, but it may have access to funding that would provide opportunities to acquire lower-yield properties that offered longer term growth.

The company would also have an opportunity to look at larger investments, he said.

De Rauville said that, if the deal goes through, CBS may have access to more retail property, allowing it to balance its portfolio. She said that at 40% of its portfolio, the company was underweight in retail ? well below the sector average of 60%.

Last modified on Thursday, 24 April 2014 13:24

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