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HERIOT REIT LIMITED

HET JSE Listed
Market Cap
R7.36 Billion

Investment Analysis: Heriot REIT Limited (JSE: HET)

Date: 14 January 2026 Analyst Role: Senior Equity Analyst, JSE Subject: Comprehensive Review of Heriot REIT Limited

Step 1: Data Gathering & Source Verification

I have accessed the most recent financial disclosures available as of January 2026. The analysis relies on the full-year results for the period ended June 2025 and subsequent trading data.

  • Reporting Period 1 (Annual): Reviewed Condensed Consolidated Financial Statements for the year ended 30 June 2025 (Released September 2025).

  • Source File: Heriot REIT FY2025 Results Announcement

  • Reporting Period 2 (Interim): Unaudited Interim Results for the six months ended 31 December 2024 (Released March 2025).

  • Source File: Heriot REIT Interim Results Dec 2024

  • Key SENS Announcements (L12M):

  • M&A/Restructuring: Completion of the Thibault REIT acquisition and increase of stake in Safari Investments (Safari) to ~59%.
  • Director Dealings: Multiple dealings by associates of the Herring family (controlling shareholders) in December 2025.
  • Source: JSE SENS Feed - Heriot REIT

Step 2: Metric Extraction

Currency Note: Metrics calculated using the closing share price of R23.00 (14 Jan 2026).

  • Market Cap: R7.36 Billion

  • Context: Small-to-Mid Cap REIT.

  • Dividend Yield (L12M): 5.3%

  • Calculation: (Interim 2025: 56.84c + Final 2025: 65.07c) = 121.91c Total Distribution.

  • Analysis: The yield is lower than the sector average (often 8-10%), but this reflects the stock trading at a premium due to growth expectations, rather than a lack of distributable income. Payout ratio remains ~100% of distributable earnings.

  • Liquidity Check: FAIL (High Risk)

  • Metric: Average daily volume is often <1,000 shares.

  • Warning: The stock is extremely illiquid and tightly held by the Herring family and management. Institutional participation is limited. Entering or exiting a meaningful position without moving the price is difficult.

  • P/E Ratio: ~16.4x (Price / Distributable Earnings)

  • Context: Expensive relative to peers like Redefine or Growthpoint (often <10x), indicating the market prices Heriot as a "Growth REIT" rather than a pure income play.

  • Net Asset Value (NAV): R20.59 per share (as at 30 June 2025)

  • Price-to-NAV: 1.12x (Trading at a ~12% Premium to NAV).
  • Significance: This is an anomaly in the current SA property market, where most REITs trade at discounts of 10-30%. It suggests high market confidence in the management's ability to compound value faster than peers.

Step 3: Operational & Strategic Analysis

Business Overview Heriot is a diversified REIT with a portfolio heavily weighted toward Industrial (logistics/warehousing) and Retail (lower LSM/rural malls) assets.

  • Strategic Pivot: The company has aggressively consolidated its position by acquiring Thibault REIT (adding Cape Town office/hospitality assets) and taking control of Safari Investments (retail). This has transformed Heriot from a small niche player into a larger, more diversified holding company.

Performance Trend (FY 2025 vs FY 2024)

  • Revenue & Income: Expanding. Distributable income surged 26.1%, driven by the inclusion of Thibault earnings and the increased stake in Safari.
  • Efficiency: Improving. Portfolio vacancies dropped significantly to 1.6% (from 3.1%), a best-in-class metric. The "Cost to Income" ratio improved as they internalized management functions for the Safari portfolio.
  • Growth: NAV per share grew by a robust 17.5%, validating the acquisition strategy.

Sector Context

  • Macro Factor (Consolidation): The SA Listed Property sector is undergoing a wave of consolidation. Smaller funds are merging to create liquidity and scale. Heriot is an acquirer, not a target, effectively acting as a "consolidator" of smaller/mispriced property funds (like Safari and Thibault).

Step 4: The Verdict

Bull Case: The "Compounder" Premium Heriot is arguably the best-managed small-cap REIT on the JSE. Management (Steven Herring) has proven they can grow NAV by double digits (17.5% in FY25) even in a tough economy. The vacancies (1.6%) are virtually non-existent compared to the sector average of 5-10%. You are paying a premium for superior asset allocation and execution.

Bear Case: The Liquidity Trap & Valuation The stock is a "roach motel"—easy to get into (if you pay the spread), hard to get out of. With daily volumes often near zero, you have no exit liquidity during a market shock. Furthermore, paying 1.12x NAV for a South African REIT is historically risky; if the growth slows, the rating could de-rate rapidly to the sector mean (0.8x NAV), implying 30% downside risk.

Fair Value Estimate R20.60 – R22.00

  • Methodology: Capped at its NAV (R20.59) plus a small premium for the "control premium" value of its Safari stake. The current price of R23.00 appears slightly stretched.

Final Rating: HOLD

  • Rationale: Operational excellence is priced in. While the fundamentals are superb, the illiquidity makes it unsuitable for most retail portfolios, and the valuation leaves no margin of safety. Existing holders should stay for the growth; new buyers should wait for a pullback to parity with NAV (~R20.50).
AI Generated Analysis Last Updated: 2026-01-14