Balwin Properties’ CEO and founder Steve Brookes wants to grow SA’s largest sectional title provider fivefold in the next five years.
The company, which on Monday released financial results for the six months to August, in which its profit plummeted 56% as it could not build during the hard lockdown, will be worth R10bn by 2025, Brookes said.
Its market capitalisation is R1.98bn and its shares are tightly held by its founders, management and private individuals. Brookes wants to attract more institutional investors.
“I’d like to think I’m a young 55 and am committed to the healthy growth of this company. I want to build and grow the Balwin brand nationwide such that by the time I’m 60, we are grossing R1bn a year and are ranked among the top 100 JSE listed companies,” he said.
“We are tightly held and need to create free float. But as we hit a higher market cap, institutional ownership will also get higher,” he said.
Founded by Brookes in 1996, Balwin listed on the JSE in October 2015 at a share price of R9.80 as a property developer and not an income-focused real estate investment trust (Reit). It has, however, moved to focus on delivering a dividend each six months, as well as capital growth.
As to whether Balwin would attract institutional money if it became a mid-cap R10bn fund, head of listed property funds at Stanlib, Keillen Ndlovu said residential property had a chance to become more prominent in the listed sector.
“The residential sector is the biggest sector globally in the listed indices and there is potential for it to grow in SA. But this (depends on whether) the residential property is income or rental based, as opposed to being reliant on developments,” he said.
“I think for a residential property fund to gain traction in SA, it needs a strong rental or income element,” he said.
Brookes said Balwin was primed to grow as the economy emerged from the lockdown, with more people buying homes.
He said the lockdown had been an unforeseen event which had halted construction for at least three months.
Balwin saw its profit fall 56% to R81m in the six months to August, while revenue fell by 35% to R930m.
The group halted construction activity in late March, at the start of the national lockdown, and then gradually resumed in June after a move to level three which had fewer restrictions on commercial activity.
Headline earnings per share fell 56% to 17c during the reporting period while its net asset value per share rose 9% to 631c.
Balwin declared an interim dividend of 19.6c, 68% higher than 11.7c in the previous period.
Anthony Clark, research analyst at Small Talk Daily, said Balwin's latest results were commendable but they had been upstaged by the company’s announcement of its residential units at Mooikloof Mega City in Pretoria.
“It’s a shame that the Mooikloof development overshadowed these results. Nevertheless, they have delivered fair operational numbers, despite the problems of Covid-19.
“Their focus on improving working capital management and the increase in their cash position should please the market,” he said.
He said Balwin’s stock price was largely flat on Monday but the market had already shown faith in the company’s recovery, as the price was up 55% over the past 30 days.
“I think the easy money has been made. Now we need to see how much of the lost Covid-19 sales Balwin can make up in the second half of its financial year,” he said.
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