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Thu 28 Aug 2025
Close: 1 100c 
Day's move: -8c (-0.72%)
Volume: 80 533
Trades: 23
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Octodec - pre-close operational update
Sector update
Despite a challenging economic environment, lower inflation combined with lower interest rates has had a positive effect on market and consumer sentiment, which in turn has supported improved occupancy and rental growth across our diversified portfolio.
Collections
Year-to-date collections in the residential and commercial sectors, as a percentage of total billings, averaged 99.3% (July 2024: 99.7%) and 97.5% (July 2024: 99.9%), respectively. The decrease in commercial collections is mainly due to retail tenants exposed to the unrepaired Lilian Ngoyi Street and one tenant that is currently under business rescue.
Financial update
During the period, we refinanced R1.1 billion in facilities with tenors of up to four years at an improved weighted average margin of approximately 26 basis points. Agreements to refinance a facility of R650 million maturing on 31 August 2025 have been signed and will be implemented accordingly.
Borrowings were reduced following the disposal of non-core properties and accordingly totalled R4.3 billion at the end of July 2025 compared to R4.4 billion on 31 August 2024. Octodec's loan-to-value ("LTV") is expected to remain below 40% in the near term, and it is the company's strategic objective to reduce this to 35% in the long term.
Year-to-date, we have concluded interest rate swaps of R2.4 billion, including forward starting interest rate swaps of R1.3 billion. The forward-starting interest rate swaps were concluded for tenors of two to three years at fixed rates of between 6.72% and 7.25%. The hedged position on 31 July 2025 was 67.4% and considering the interest rate cycle, Octodec has revised its strategy to increase the hedging position to between 70% and 80%. Accordingly, Octodec has commenced the process of gradually increasing its interest rate swap exposure as opportunities present themselves.
The weighted average cost of debt improved to 9.2% at the end of July 2025, compared to 9.5% on 31 August 2024, due to improved margins on the facilities refinanced and the reduction in the interest rate.
Acquisitions and disposals
To date, we have successfully disposed of 15 properties for approximately R130 million, a 6.6% discount to book value. The proceeds have been allocated towards debt reduction and capital investments in existing core properties and value- unlocking opportunities like Yethu City.
The process of reaching agreement to dispose of Killarney Mall continues, and we will announce the disposal once an agreement of sale has been signed. While we continue to engage a number of potential buyers, discussions with a certain party are further along than others.
Management continues to focus on aggressively disposing of non-core properties and consequently increasing the average value of the properties invested in.
Distribution outlook
The lower interest rate is expected to contribute to improved economic conditions, with reduced pressure on both consumers and businesses anticipated to unlock opportunities for growth within Octodec's portfolio.
In addition, the extended stay of tenants at our Capitol Towers North and Talkar properties, as mentioned above, has positively impacted Octodec's rental income for the period.
As a result of the above factors, the growth in full-year distribution is showing improvement, and we therefore upgrade the previous distribution growth guidance of 2.0% to 4.0% to a growth of 3.0% to 6.0%.
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Octodec - pre-close update and virtual Q&A
Shareholders and noteholders were advised that Octodec will be providing a pre-close operational update for the year ending 31 August 2025 via a SENS announcement on Thursday, 21 August 2025. This replaces the virtual presentation format previously used.
A virtual Q&A session will follow on Friday, 22 August 2025 at 10h00, hosted by Nedbank Corporate and Investment Banking ("Nedbank CIB"). Participating in the session will be Octodec's Chief Executive Officer ("CEO"), Jeffrey Wapnick, Deputy CEO and Financial Director, Riaan Erasmus, and Charlene Conradie, Chief Operating Officer at City Property Administration (Pty) Ltd., Octodec's property and asset manager.
Parties interested in participating in the virtual Q&A, should email cibresearch@nedbank.co.za, whereafter Nedbank CIB will share details to register for and join the meeting being held via Microsoft Teams.
A recording of the virtual Q&A will be made available on Octodec's website following the live meeting at octodec.co.za/news-media/ under Virtual Events & Webcasts.
Octodec will release its audited financial results on 25 November 2025.
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Octodec - changes to board
Shareholders and noteholders were advised that Sanjay Ravjee Bhikha and Robin Lockhart-Ross have been appointed as independent non-executive directors of Octodec with effect from 1 September 2025.
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| Closing price data source: JSE Ltd. All other statistics calculated by ProfileData. |
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