JOHANNESBURG — After Steinhoff and Capitec, another South African JSE-listed company has found its way into Viceroy’s sights. Commercial property developer and investor NEPI Rockcastle found its share price on the JSE tumbling by over 14% at one stage during trade on Wednesday as Viceroy published a report accusing the company of inflating its net profit after tax numbers. However, it’s already been a terrible year for NEPI Rockcastle whose share price was above the R220 mark on 2 January 2018 and had closed at around R116 on Tuesday 27 November 2018, a day before the Viceroy report. With the Viceroy attack in play, NEPI’s share price had dipped below the R100 mark. What’s more interesting is that it seems as if Viceroy is increasingly finding more short-selling opportunities in the beleaguered JSE market. One wonders who will be next? – Gareth van Zyl
(Bloomberg) –Â NEPI Rockcastle Plc shares slumped the most in nine months in Johannesburg after short sellers Viceroy Research accused the Johannesburg and Amsterdam-listed real estate fund of overstating its profits from Romania.
Viceroy said in a report published Wednesday that it had uncovered “numerous inconsistencies within NEPI Rockcastle’s financial reporting.” Even without taking those into account, the Isle of Man-based investor is “fundamentally overpriced when compared with peers,” it wrote.
“The report is misrepresenting the figures,” NEPI Chief Financial Officer Mirela Covasa said by phone. “We are not overstating profits, there are specific accounting reasons for the numbers.”
NEPI’s Romanian portfolio generated pre-tax profit of 284.9m euros ($323m) in 2017, according to its financial statements. Yet the assets really operate at annual losses of more than 40m euros, according to Viceroy, citing local account filings. Romania is the company’s largest market and makes up almost half of its rental income.
Viceory rose to prominence just over a year ago when it published a report on South African retailer Steinhoff International Holdings NV just after the company reported accounting irregularities that triggered a share-price collapse. That report detailed a number of third-party transactions that were used to inflate asset values, deals that are under investigation by auditors at PwC.
NEPI shares declined 13% to R99.94 as of 3:36pm in Johannesburg, extending the drop for the year to 53%. Fortress REIT Ltd., another Johannesburg-listed property firm that owns a 24% stake in NEPI, fell 4.9%.
NEPI’s 400m euros notes maturing in February 2021 are down eleven cents to 90 cents on the euro, the lowest level since their issuance in November 2015, according to data compiled by Bloomberg.
