Release Date: May 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Octodec Investments Ltd (JSE:OCT, Financial) maintained a distribution of ZAR0.60 per share, indicating stable returns for shareholders.
- The residential portfolio achieved a rental income growth of 5.1%, driven by tenant retention and increased market rentals.
- The company has completed significant refurbishments and value-added services in residential properties, enhancing tenant satisfaction and competitiveness.
- Shopping centers have performed well, with significant improvements in tenant mixes and high occupancy rates in parking lots.
- Octodec Investments Ltd (JSE:OCT) has a strong focus on ESG initiatives, including solar installations and water infrastructure projects, contributing to sustainability and cost management.
Negative Points
- Vacancies in the residential portfolio increased from 6.9% to 8%, primarily due to issues in Tshwane and Johannesburg.
- Property operating expenses grew by 8.1%, outpacing revenue growth and impacting net property income.
- Administrative and corporate expenses increased by 12.3%, adding pressure on overall profitability.
- The company faces challenges with the stability and functionality of municipal services, particularly in Johannesburg, affecting operational efficiency.
- The industrial sector experienced increased vacancies, impacting rental growth and overall performance in this segment.
Q & A Highlights
Q: Jeff, you made an interesting commentary about trying to identify the target markets. Please could you provide some more detail regarding your thinking?
A: Thank you, Charles. The market is moving, and we are focusing on understanding the needs of the residents in Killarney. We've been engaging in active community building to get deeper insights into what the market really wants. This involves market research and direct engagement with residents to ensure any redevelopment is based on solid market research rather than assumptions.
Q: Why is like-for-like rental income down in the retail sector?
A: The rental like-for-like in street shops has increased by 1.7%, impacted by some negative rental reversions in new leases. For shopping centers, the rental like-for-like increased by 2.7%. Overall, the reversions are positive, with 0.3% on new leases and 0.9% on renewals.
Q: What is your level of concern about the stability of the municipality, particularly in Tshwane?
A: We spend a lot of time engaging with the Council. While not completely functional, we know the right people to get things done. The main issues are around municipal accounts, specifically electricity and water. Despite these challenges, we manage to keep things running, although it requires significant effort from our team.
Q: What are your thoughts on Pick-and-Pay and whether there's an impact on the portfolio?
A: We are engaging with Pick-and-Pay to address any issues. Our exposure to Pick-and-Pay is relatively small, amounting to less than 15,000 square meters of GLA and 0.1% of our total rental income. We are working to ensure that any concerns are resolved and that our tenants are performing well.
Q: Do you have concerns about whether residential rentals in the future can grow at a faster rate than costs?
A: The high unemployment rate is a significant inhibitor. However, we are exploring ways to manage costs, such as solar installations and operational efficiencies. By managing vacancies and operating costs effectively, we aim to improve rental growth. Initiatives like Yethu City, if successful, will also contribute positively.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
