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CEO shares view of Dipula’s future

DENISE MHLANGA mhlangad@businesslive.co.za

Dipula Income Fund, which collapsed its A and B shares in April into a single structure, is eyeing growth opportunities and expects a better performance by its shares to attract investors. Business Day sat down with CEO Izak Petersen to get a glimpse into Dipula and its future.

Dipula Income Fund, which collapsed its A and B share structure in April into a single share structure, is eyeing growth opportunities and expects better performance of its shares to attract investors.

Dipula’s growth has been constrained by its dual share structure, resulting in the incorrect pricing of its share.

The real estate investment trust (Reit), which owns a diversified portfolio of retail, office, industrial and residential rental assets located across all provinces of SA, listed in August 2011 with a portfolio of about R2bn. The value of its portfolio had grown to R9.1bn by endAugust.

Despite years of being of having a dual capital structure, Dipula has proven to be a wellmanaged business under the leadership of CEO Izak Petersen who took the reins ahead of listing. Business Day sat down with Petersen to get a glimpse into Dipula and its future.

What has Dipula been up to in the last five years?

Dipula has performed well, but the dual share structure was a huge constraint as we couldn’t compete fairly in the market especially when economic growth started slowing down. We successfully resolved the share structure in April and this positions us to pursue growth opportunities and enhance our brand awareness in the market.

The last two years have been tough on the property sector due to the Covid-19 pandemic and the July 2021 unrest. Our defensive portfolio ensured we continued to manage a healthy business amid the chaos.

Pre-Covid-19, the office sector — battling high vacancies as tenants reduced space and adopted remote working — was not performing well. The pandemic accelerated these trends.

How are you positioning the company for growth?

Prudent capital allocation and seeking the right opportunities, while playing to our strengths is our focus. We are a diversified fund with a retail bias, but we wouldn’t mind increasing our exposure to industrial and logistics, and we believe residential is a tradable asset at the moment.

In addressing challenges within our office portfolio, we will convert some properties into residential, but we don’t intend to be the biggest residential player.

Do investors understand your business?

For years our stock was mispriced because investors could not fully understand the nature of the business.

The market didn’t compare us to the rest of the listed Reits. We were compared to two black funds — Delta and Rebosis property funds.

Dipula has held its own, having built a healthy business since listing. Now that the capital structure is out of the way, this paves the way for improved tradability and liquidity, as well as possible index inclusion over time.

What about access to funding?

When we listed, property was seen as a solid investment and money was chasing the asset class that was performing decently. This shifted when economic growth slowed [as] property needs a growing economy to perform. Liquidity has always been a challenge for Dipula ... investors want to trade in and out of a stock. This, coupled with our constrained capital structure [now resolved] and negative sentiment towards the real estate sector — access to funding becomes difficult, and not just for Dipula.

Are you still finding value in the JSE?

We remain listed on the JSE, and continue to see some companies successfully raise capital, but we think the platform can be [more] issuer friendly. Though some of our peers have secondary listings on alternative exchanges, we think they are still fairly small, and we don’t fully understand their value proposition currently.

It’s great to have these alternatives because in a few years’ time, they will become viable alternatives. Currently, the JSE is not issuer friendly, it is expensive and does not provide the right levels of liquidity. Instead of making it easier for companies, they are behaving like the government by overregulating.

For this reason, we are seeing big companies such as PSG and others delisting, rethinking the value of the JSE or considering alternative exchanges. These companies are doing so with good reason, and the JSE needs to start listening and respond in a positive manner to attract and retain investors. However, current investors on the JSE are not making as much noise as companies.

What is next for Dipula?

Now that the capital structure has been resolved, we expect our share price and cost of capital to correct. The market is starting to understand our business and take notice of Dipula as an investment stock.

We are focused on addressing liquidity challenges to attract investors while pursuing untapped growth opportunities in SA.

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2022-09-30T07:00:00.0000000Z

2022-09-30T07:00:00.0000000Z

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