Our opinion on the current state of BALWIN(BWN)
Balwin Properties (BWN) is a developer of secure sectional title properties in South Africa. The company is now turning its attention to renting out some of the properties that it develops to improve its income. The company reports strong demand for its units and is also moving into supplying solar power and internet fibre. The share was listed 5 years ago at R10 per share but trades today for 270c. Obviously, the property development market is a function of consumers' disposable income and the state of the economy. The last three years have been very tough for consumers, and the economy has been in a full-blown recession.
In our view, the move to rental is a good one as it will build up a passive income which can be used to meet fixed overheads and contribute to profits. Balwin owns 25% of Balwin Rental, which has the right to buy as many as 4,544 units developed by Balwin. This should help to stabilize the company's income. Eventually, it is expected that Balwin Rentals will be listed.
On 4th October 2020, the company launched its Mooikloof Mega City construction project as a R44bn public/private partnership aimed at middle-income South Africans who earn between R3,500 and R22,000 a month (known as the "gap housing market"). This caused the share to rise by 13%.
In its results for the year to 29th February 2024, the company reported revenue down 29% and headline earnings per share (HEPS) down 48%. The company's net asset value (NAV) increased 4% to 858.49c per share. The company said, "The annuity business portfolio experienced strong growth off a low base and increased its revenue to R132.5 million, contributing 5.6% (2023: 2.3%) to the total group revenue." The group ended the period with a loan-to-value (LTV) of 40.5%.
In a voluntary update on 24th July 2024, the company stated its intention to increase its rental portfolio up to 7,300 units over the next 8 to 10 years. This is seen as complementing its build capacity of 2,000 to 3,000 units per annum.
In a trading statement for the six months to 31st August 2024, the company estimated that HEPS would fall by between 54% and 59%. The company said, "Activity in the residential property sector remained under significant pressure during the interim period owing predominantly to the prolonged high-interest rate environment."
Technically, the share has been in a long-term downward trend, and we advise waiting for it to break up through its downward trendline before investigating further. That appears to be in the process of happening (27-9-24). We believe it will recover as the economy recovers. It is trading for 25% of its net asset value (NAV) - which looks really cheap.
In our view, the move to rental is a good one as it will build up a passive income which can be used to meet fixed overheads and contribute to profits. Balwin owns 25% of Balwin Rental, which has the right to buy as many as 4,544 units developed by Balwin. This should help to stabilize the company's income. Eventually, it is expected that Balwin Rentals will be listed.
On 4th October 2020, the company launched its Mooikloof Mega City construction project as a R44bn public/private partnership aimed at middle-income South Africans who earn between R3,500 and R22,000 a month (known as the "gap housing market"). This caused the share to rise by 13%.
In its results for the year to 29th February 2024, the company reported revenue down 29% and headline earnings per share (HEPS) down 48%. The company's net asset value (NAV) increased 4% to 858.49c per share. The company said, "The annuity business portfolio experienced strong growth off a low base and increased its revenue to R132.5 million, contributing 5.6% (2023: 2.3%) to the total group revenue." The group ended the period with a loan-to-value (LTV) of 40.5%.
In a voluntary update on 24th July 2024, the company stated its intention to increase its rental portfolio up to 7,300 units over the next 8 to 10 years. This is seen as complementing its build capacity of 2,000 to 3,000 units per annum.
In a trading statement for the six months to 31st August 2024, the company estimated that HEPS would fall by between 54% and 59%. The company said, "Activity in the residential property sector remained under significant pressure during the interim period owing predominantly to the prolonged high-interest rate environment."
Technically, the share has been in a long-term downward trend, and we advise waiting for it to break up through its downward trendline before investigating further. That appears to be in the process of happening (27-9-24). We believe it will recover as the economy recovers. It is trading for 25% of its net asset value (NAV) - which looks really cheap.
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