Balwin Properties on track to maintain current growth

27-11-2015
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Balwin Properties, which made an entry on the JSE in October, on Wednesday announced its maiden financial results for the six months ended 31 August 2015.

During the period, the home builder grew its revenue 71% to R823m, while its net asset value rose 45%.

Balwin Properties CEO, Stephen Brookes said the listing on the JSE had led to a boost in new sales and the group was set to continue its strong growth path.

“The market’s response has been fantastic, with most first phases sold out within a couple of weeks from launching as we expanded into Pretoria for the first time and launched new developments in Cape Town, Somerset West, Sandton, Modderfontein, Randburg and Oakdene, south of Johannesburg,” he said.

Operating profit increased by 81% to R319 million. Earnings per share increased by 76% to 58 cents and headline earnings per share was up 100%, also to 58 cents, based on the 400 million shares in issue at the end of the reporting period. If Balwin was listed at 31 August 2015, basic and headline earnings per share would be 49 cents respectively, based on 472 million shares in issue.

Balwin is differentiated from other JSE listed property entities or REITs as its business strategy is underpinned by the generation of profits through the development and sale of large-scale residential estates averaging between 500 and 1,000 units and offering secure, affordable, high-quality and environmentally friendly one, two and three bedroom apartments ranging in size from 45m2 to 120m2.

Balwin’s attractive investment proposition is backed by a robust, proven, business model and strong market fundamentals to deliver sustainable returns for investors.

The Company will re-invest 70% of after tax profits back into the business to support superior NAV uplift and will distribute the remaining 30% of profits to shareholders, providing a strong projected immediate dividend yield of 3.5%.

“We are not a speculative builder – all developments are carefully matched against pre-sales, providing us with an exceptional cash generating ability and scalability, protecting the business from macro-economic impacts to some extent,” he explains.

Balwin is not a speculative builder as it constructs and sells its developments in several phases according to demand. This phased build-to-sell model has high barriers to entry and is easily scalable. In addition, the Company plans to develop, retain and manage a rental portfolio of 2,000 to 3,000 units by 2020.

Balwin indicated that they will mitigate against the expected rising interest rate cycle by focusing on more 1 bedroom apartment blocks in some developments where the demand for such units outstrips supply. The Company is currently piloting a rental unit development, Malakite in Greenstone, Johannesburg in a move to diversify its income stream further through a rental portfolio which will begin to generate income in the next financial year.

Investec Asset Management portfolio manager, Peter Clark said Balwin has a strong track record where it executes its projects efficiently. "Its pipeline is impressive and it is well-positioned in an attractive segment of SA’s residential market and is expected to continue its strong performance," said Clark.

“Headwinds aside, we anticipate to maintain our growth and current sales levels. This is a seasonal business with most units traditionally transferring towards the end of the financial year. Our forecasted sales for the 2016 financial year were 83% secured at the end of the interim reporting period,” Brookes concluded.