Balwin Properties’ share price jumped by nearly a fifth on Monday, the day after the group launched the largest sectional title development in SA's history.
The company is SA’s biggest developer of sectional title houses, the majority of which it builds to sell. In recent years the group has launched a rental business and started to build lower-priced product so that it can diversify its income streams.
Its share price climbed 15.5% in early trade before closing 13.07% higher at R3.72 on Monday, but was still down 9.86% in the year to date and 48.83% on a three year basis. SA’s All Property Index is down 47% this year.
Small caps analyst Anthony Clark said Balwin’s price had climbed on thin trading volumes and was driven by the good news.
“Balwin’s shares are not held by a significant number of institutions but rather by its founders, directors and retail investors. I think the market is overreacting a bit to what is a long-term project,” he said.
“This R44bn contract will take years to roll out and will require significant capital before it realises profits. It’s a good long-term project which will help to get lower middle-class people onto the property ladder,” Clark said.
The Mooikloof Mega City is a public-private partnership focused on providing housing to people who have missed out on housing opportunities in the past because of a lack of affordability.
Construction of the first phase of the project began at the weekend. President Cyril Ramaphosa said at the launch on Sunday that the Mooikloof Mega City was a critical project given that it would create thousands of job opportunities and homes.
The residential section is JSE-listed Balwin Properties’ biggest housing project to date and is projected to be worth R44bn when it is completed in about 2030. It will include up to 50,000 houses.
It was specifically designed for the gap housing market. This market refers to housing opportunities for people with a combined monthly income of R3,501 to R22,000. They earn too much to get a free house from the government but too little to qualify for a bank bond.
Balwin is expected to release financial results for the six months to end-August next week.
The company released a trading statement last month in which it said Covid-19 and the lockdown had placed severe pressure on its performance.
Headline earnings per share in the six months to end-August were expected to fall between 55% and 60% from the previous period’s 40c, the group said in a trading update.
The outbreak of Covid-19 disrupted construction activity amid challenging market conditions, Balwin said, reporting a 5% reduction in the average selling price of apartments from the year-earlier period.
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