For a company that managed to raise R7.65bn through three wildly oversubscribed bookbuilds in 2017 alone, Greenbay’s stock market wobble last week is a curious deviation from its recent popularity.
To recap: rumours that the Resilient stable of companies — including Greenbay, Resilient itself, Nepi Rockcastle and Fortress may be the next target of activist short-sellers Viceroy, drove shares in the four companies as much as 28% weaker in early trade last week, before a swift rebound, bolstered by two typically strong trading updates from Resilient and Fortress.
The former indicated that its distribution for the six months ended December would be 13%-13.5% higher year on year, while Fortress predicted a gain of 14.5%-15.5% for its B shares’ interim distribution. For now, it appears that institutional asset managers are taking management at its word.
Stanlib’s head of listed property funds, Keillen Ndlovu, says: "Based on available information, research and site visits we have done, we will continue to hold these stocks. Should further data become available, we may reconsider our position if necessary."
But Rezco Asset management’s Matthew Thomson says it shows that Greenbay, Resilient and Nepi Rockcastle — the targets of what Resilient director Des de Beer believes are malicious hedge funds – are "not just normal, stable defensive property companies.
"These are higher risk, high value companies. They have punchy valuations.
"So in my view, when something is trading at such a premium to NAV [net asset value] you should see this kind of volatility."
The extent of shareholding between the four firms is one reason they shook in unison.
Resilient owns about 32% of Fortress B, which in turn owns about 4% of Resilient.
Resilient also holds stakes in Greenbay (about 10.3%) and Nepi Rockcastle (over 7%).
"It’s such an intertwined group, investors generally look at them as one homogenous [entity]", says Thomson.
Momentum’s Nesi Chetty says that the web of cross-shareholdings between Resilient, Nepi Rockcastle, Greenbay and Fortress "is a problem but we’ve known about it for a while".
Still, Thomson argues that the cross-holdings are an efficient way of raising capital.
In the case of Greenbay, which now has a market capitalisation of a cool R21bn, after less than two years of being listed, he says "a lot of that is on the back of support from Resilient and Fortress. They can capitalise Greenbay with their own money, which helps reassure investors".
For its part, Resilient undertook only one bookbuild in 2017, but scooped R2.5bn from slavering investors after setting out to raise just R750m.
Nepi Rockcastle raised R5.2bn in October, before issuing a €500m, seven-year eurobond in November.
"I really don’t think there is any fraud or accounting manipulation in this group. Investors are just backing the growth story and not necessarily focusing on valuation," says Thomson.
Nervousness that "the next Steinhoff" is set to be brought down by aggressive hedge funds have seen shares in IT group EOH as well as pharmacare company Aspen cut down by jittery investors who have suffered through a near 90% collapse in Steinhoff’s market value since the abrupt departure of CEO Markus Jooste after suspected accounting fraud.
In a tweet, Viceroy indicated at the end of December that another South African company was in its sights. For now, the analysts Business Day spoke to are sceptical the Resilient stable of properties is the likely target.
"A lot of [their] acquisitions were to buy hard assets," says Chetty. "Steinhoff was different in that they were buying loss-making businesses."
Chetty says there is greater clarity as far as property companies’ earnings are concerned. "The revenue line is rental collections from tenants and those leases tend to be fixed contractually, so the revenue line is more consistent," he said.
Thomson said that Steinhoff had high debt levels.