Burstone (previously Investec Property Fund) is a diversified South African real estate investment trust (REIT) with a portfolio valued at R27.2 billion, comprising 92 properties in South Africa worth R15.7 billion. Like many REITs, Burstone was affected by the general sell-off in property shares on the JSE in 2018 following the Resilient group's challenges. Currently, the share is trading well below its net asset value (NAV), presenting a potential buying opportunity for investors.
Burstone's property investments are spread across South Africa and Europe, with the company owning 9.2% of Ingenuity Property. Economic conditions in South Africa have resulted in decreased demand for space, lower rental rates, longer vacancy periods, and higher costs to attract and retain tenants. Despite these challenges, Burstone has been a well-managed REIT, although its former CEO, Nick Riley, has been replaced by Andrew Wooler and Darryl Mayers as joint CEOs. The company's strategy is to recycle its capital away from South African assets and into Western Europe.
On 11th February 2020, Burstone announced it would increase its stake in Pan European Logistics (PEL) from 42.9% to 75% for 191 million euros. PEL owns 45 logistics properties valued at approximately 900 million euros. During the COVID-19 lockdown, the company expected to lose R40 million per month but managed to collect 71% of its South African rentals, 83% in Europe, and 87% in the UK. In March 2020, Burstone sold its 38.04% interest in its UK operation (Argo) for GBP35 million (R744 million), which was GBP12.7 million (R270 million) less than its book value.
For the year ending 31st March 2024, Burstone reported a 1.3% increase in revenue and a 35.4% decline in headline earnings per share (HEPS). The company's NAV fell by 4.5% to 1545c per share, and its loan-to-value (LTV) ratio stood at 44%. However, in a trading update for the six months ending 30th September 2024, Burstone reported a significant reduction in its LTV to 33.5%. The company expects its first-half results to align with previous guidance, with distributable income per share (DIPS) estimated between 49.02c and 50.04c.
The share is currently trading at less than 50% of its NAV and has been in a declining trend since May 2022. Given the recent reduction in LTV to below 40% and the overall undervaluation, we see Burstone as a good buying opportunity at its current levels. The company's strategic shift towards Western Europe and focus on improving its financial metrics further support this positive outlook.
Burstone's property investments are spread across South Africa and Europe, with the company owning 9.2% of Ingenuity Property. Economic conditions in South Africa have resulted in decreased demand for space, lower rental rates, longer vacancy periods, and higher costs to attract and retain tenants. Despite these challenges, Burstone has been a well-managed REIT, although its former CEO, Nick Riley, has been replaced by Andrew Wooler and Darryl Mayers as joint CEOs. The company's strategy is to recycle its capital away from South African assets and into Western Europe.
On 11th February 2020, Burstone announced it would increase its stake in Pan European Logistics (PEL) from 42.9% to 75% for 191 million euros. PEL owns 45 logistics properties valued at approximately 900 million euros. During the COVID-19 lockdown, the company expected to lose R40 million per month but managed to collect 71% of its South African rentals, 83% in Europe, and 87% in the UK. In March 2020, Burstone sold its 38.04% interest in its UK operation (Argo) for GBP35 million (R744 million), which was GBP12.7 million (R270 million) less than its book value.
For the year ending 31st March 2024, Burstone reported a 1.3% increase in revenue and a 35.4% decline in headline earnings per share (HEPS). The company's NAV fell by 4.5% to 1545c per share, and its loan-to-value (LTV) ratio stood at 44%. However, in a trading update for the six months ending 30th September 2024, Burstone reported a significant reduction in its LTV to 33.5%. The company expects its first-half results to align with previous guidance, with distributable income per share (DIPS) estimated between 49.02c and 50.04c.
The share is currently trading at less than 50% of its NAV and has been in a declining trend since May 2022. Given the recent reduction in LTV to below 40% and the overall undervaluation, we see Burstone as a good buying opportunity at its current levels. The company's strategic shift towards Western Europe and focus on improving its financial metrics further support this positive outlook.
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.