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Analysis of Fairvest Property |
I was setting up a document on property investment in South Africa, when I saw that Fairvest Property was offering a yield of some 10% - enough to get me to take a closer look.
I estimate Fairvest's sustainable level of earnings as being some 8.4c per linked unit. Discounting at 8% (a lower rate than with equities, because of the greater certainty surrounding a stream of property rentals) gives a value of R1.05/share.
The balance sheet has cash equivalents plus trade receivables of R43m, compared to current liabilities plus deferred taxation of -R14m, which adds about 28c per linked unit to the valuation.
An interest distribution of 5.2c per share was declared & paid out to shareholder on the books at the close of business on 13 April 2012.
So total valuation is some R1.28 per linked unit (valuations must be taken with a pinch of salt, ask 10 people to do them and you'll get 10 different answers - for instance, who says you must discount at 8% and not 9%?).
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