Nepi Rockcastle, the JSE’s largest real estate counter (with a market cap recently breaching R100bn), continues to under-promise and overdeliver on the earnings growth front.
The East European mall owner achieved a better-than-expected 3.1% uplift in dividend payouts (in euro) for the six months to June and last week doubled its full-year growth guidance to December from 1.5% to 2.5%-3%.
The company has 60 shopping centres worth €8.1bn, spread over eight countries. It delivered a strong operational performance in the first half of 2025.
Sales turnover and base rentals were up 4.6% and 5.3% respectively while shoppers’ basket size increased by 9.7%. The vacancy rate dropped to 1.8%, down from 2.7% a year earlier.
Net operating income rose 12.1%, boosted by Nepi Rockcastle’s latest two Polish acquisitions, Silesia City Center and Magnolia Park, as well as the impact of the sale of its only Serbian mall, Promenada Novi Sad.
Nepi Rockcastle’s upbeat performance comes on the back of robust GDP, employment and retail sales growth numbers coming out of the Central and Eastern Europe (CEE) countries in which the company operates.
CEE continues to outperform Western Europe in macroeconomic terms despite political jitters in the region due to various government shifts, talk of changing tax laws and the Ukraine war.
CEE is expected to achieve GDP growth of 2.2% and 2.5% this year and next, well ahead of the 0.9% and 1.1% forecast for Western Europe (euro area), according to the European Commission. CEE consumers’ propensity for retail therapy also appears intact, with annual consumption up nearly 10%.
Analysts say it’s not surprising that Nepi Rockcastle is regarded as a proxy for the CEE region’s resilient economy, given the size and relevance of its portfolio.
The company, which was co-founded with only a handful of developments in Romania in 2007 by the South Africa-based Resilient group, has since become the largest retail landlord in the CEE. The stock also trades on the Euronext Amsterdam bourse.
Nepi Rockcastle is one of the few JSE-listed property stocks trading comfortably above pre-pandemic levels. Its share price is up a hefty 82% over the past five years, placing the counter at a discount to NAV of less than 5%.
That compares to a sector average of closer to 20%, which raises the question: is the company overbought at this week’s share price level of about R147?
Nepi Rockcastle is always worth owning as a rand hedge
— Nicolas Lyle
Analysts don’t believe so — most have a buy recommendation on Nepi Rockcastle and still regard it as a core holding. “Nepi Rockcastle is always worth owning as a rand hedge,’’ says Nicolas Lyle, property analyst and portfolio manager at Stanlib.
He believes there’s still share price upside to be had for strategic, long-term investors, though there are some macroeconomic concerns — mainly inflation and bond yield pressure in Romania — which could affect short-term performance.
Evan Robins, portfolio manager at Old Mutual Investment Group, says investors can’t expect Nepi Rockcastle to be cheap given the size, maturity and stability of the company. “But that doesn’t mean it’s not a good investment proposition.”
Referring to the decent 8.1% forward dividend yield (at a 90% payout ratio) at which the stock is trading, Robins says the share is “not unreasonably priced in my view”.
He adds that though sales growth in the CEE region may be coming off a peak, the numbers are still pleasing. “One needs to focus on real and not nominal growth, given the decline in inflation rates.’’
In June Nepi Rockcastle was included in the FTSE EPRA Nareit global emerging index, which should place the stock on the radars of more international portfolio managers.
Given Nepi Rockcastle’s already sizeable portfolio and regional dominance, investors may be wondering where growth will come from.
Speaking at last week’s results presentation, CEO Rüdiger Dany said management continues to look for acquisitions “that tick the right boxes”.
The company would like to expand its retail footprint in the Romanian capital, Bucharest, as well as in other areas. Dany said the company has €1.1bn in liquidity to execute on deals.
He said management’s proven track record of buying the right assets at the right prices has been underscored by the most recent additions to its Polish portfolio — the 88,000m² Silesia City Center in Katowice and the 124,282m² Magnolia Park in Wroclaw.
The two malls, among Poland’s largest, were bought for a combined €758m late last year and have already shown a €60m uplift in valuation — before the implementation of various value-unlock asset management initiatives. “It gives us a lot of comfort in terms of the quality of our acquisitions.”
Meanwhile, work is already under way on a €795m development pipeline of extensions, refurbishments and greenfield projects, which Dany said should add 188,000m² of new income-generating lettable space to Nepi Rockcastle’s existing retail footprint by end-2028.
Redevelopment projects include a 55,400m² mixed-use extension of Promenada Bucharest Mall, which will add hotel, office, cinema and additional retail space, of which 68% is already pre-let.
Management is awaiting final approval for a 60,500m² retail centre to be built in Plovdiv, Bulgaria’s second-largest city, with the centre expected to open in the third quarter of 2027. Lease terms for 40% of the space have already been agreed.
There are also plans to do residential developments on land owned next to two of the company’s Romanian shopping centres — one in Brasov and the other in Craiova.
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