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The Finance Ghost: The market lowdown on Standard Bank, Absa, Hyprop and TFG

The Finance Ghost: The market lowdown on Standard Bank, Absa, Hyprop and TFG
From left: The Standard Bank logo. (Photo: Naashon Zalk / Bloomberg via Getty Images) | Pick n Pay. (Photo: Waldo Swiegers / Bloomberg via Getty Images) | TFG. (Photo: Gallo Images / Jacques Stander)

Over the past year, Standard Bank’s share price is up 12%. When you add in the dividend, that’s a very healthy return. In stark contrast, Absa is down by nearly 10%.

In 2023, Absa could only manage an asthmatic 0.6% increase in Heps, or 1.1% on a normalised basis that adjusts for the Barclays separation. The substantial decrease in headline earnings in the product solutions and everyday banking clusters (both on the retail banking side) offset a big chunk of the growth in the corporate and investment banking cluster. Return on equity (the key metric for a bank) fell from 15.3% in 2022 to 14.4% in 2023.

Meanwhile, at Standard Bank, Heps was up by a juicy 26% for the year and return on equity improved from 16.3% to 18.8%. There’s now an enormous 440 basis points gap in return on equity between Standard Bank and Absa. Standard Bank has done a particularly good job in Africa, a notoriously difficult place to do business.

Hyprop is not winning friends at Pick n Pay

Hyprop released the disappointing news this past week that there is no interim distribution coming from the fund. That’s not completely unheard of in the property market at the moment, though I don’t think anyone was expecting it from Hyprop.

The weird part is that Pick n Pay exposure was cited as a major factor in the decision, even though Hyprop owns malls that Pick n Pay would likely consider to house flagship stores (and thus core to the strategy even in a crisis situation).

The market saw right through this blame game, and many have commented that Hyprop is paying top dollar for Table Bay Mall and that perhaps that capital allocation decision is a bigger concern right now than any potential exposure to Pick n Pay. As much as the retailer is clearly struggling, we don’t even know yet whether it will try to renegotiate lease terms on such important stores.

The other issue Hyprop highlighted (and which nobody disagreed with) is the depreciation of the naira and the Nigerian investment suffering as a result.

Perhaps we will all be proven wrong and Pick n Pay will become a headache for Hyprop. But for now, it feels like the company was looking for a convenient scapegoat for why there is nervousness about paying an interim distribution. With distributable income per share down by 13.4%, the market would have at least liked to see a distribution that dipped by a similar amount year on year. Instead, there’s nothing.

For reference, Growthpoint also experienced a drop in distributable income per share (down by 8.6%), yet there’s still a dividend. It just happened to decrease by a similar percentage to earnings — and let’s not pretend that Growthpoint doesn’t have exposure to Pick n Pay. It’s always worth highlighting the performance of the V&A Waterfront as the flagship property in that group, with distributable income up 13.7%.

TFG makes landlords happy

The Foschini Group is already a critical part of the South African retail landscape, operating numerous stores under a variety of brands. There’s about to be another one, as the retail group has announced a franchise agreement with JD Sports Fashion.

I find it amazing that there’s space in the SA market for yet another seller of brands like Nike and Puma. The Foschini Group reckons that more than 40 stores will be opened over the next five years in South Africa. Landlords certainly won’t complain about that. 

Clarification

Curro has clarified that, although total tuition fee revenue increased by 12% during the 2024 financial year, the average fee increase per Curro learner was about 8%. Considering this, Curro disagrees with the assertion that was made in this column last week that it is “piling pressure on parents” and says it has limited fee increases as far as possible. DM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R29.

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