South African-focused, JSE-listed diversified REIT, Dipula Income Fund today announced that GCR Ratings (GCR) affirmed the Group’s national scale long and short-term issuer ratings at BBB+ (ZA) and A2 (ZA) respectively.
The ratings agency further attached a Stable Outlook to the long-term rating.
In their ratings announcement, GCR noted the ongoing solid performance of Dipula’s portfolio as well as the Group’s maintenance of financial discipline, including solid gearing and credit protection metrics as well as an improvement in financial flexibility.
Dipula CEO, Izak Petersen, commented:
“The affirmation of our credit rating by GCR underscores our efforts to improve operational and financial measures despite significant macro-economic challenges and a rising interest rate environment.
“We believe that there is the potential for an upward rating progression over the medium term, especially as we deliver on enhancing asset quality by converting some of our office assets to residential, as well as the current refurbishment and repurposing of some retail space.
“In addition, stable interest rates and the introduction of additional funders in our current financial year are expected to further improve our liquidity position.
GCR noted that Dipula’s capital structure should continue to improve, following the consolidation of two share classes into a single equity class with common rights in May 2022. Dipula has been able to negotiate a new syndicated debt facility with its major funders partly because of the single share structure. The new structure will allow for additional funders to be introduced over time, enhancing financial flexibility.
Despite higher debt levels used for capex, Dipula maintained stable gearing metrics with an LTV ratio ranging between 36% and 40% over GCR’s review period, well within the covenant level of 50%.
Although Dipula’s net interest cover ratio contracted to 2.8 times because of rising interest rates, GCR does not expect it to be near the 2 times covenant threshold.
In its outlook statement, GCR commented that Dipula is expected to continue displaying earnings resilience and that credit protection measures will remain in line with the rating level. It expects Dipula’s LTV ratio to trend between 35% and 40% and the interest cover ratio to be no less than 2.3 times and 2.6 times.