ANALYSTS say Balwin Properties, which listed on the JSE yesterday, offers tremendous upside over the next few years given its impressive development pipeline.
Balwin is the largest homebuilder in SA and focuses on sectional title residential estates with 500 to 1,000 units per complex. These units have a price range of R600,000-R1.7m and target buyers in the mid- to high living standards measures.
Balwin’s first trade opened at R11, giving it a sizeable market capitalisation of R5.2bn.
Balwin differs from other JSE-listed property entities and real estate investment trusts as its business strategy is to generate profits through the development of residential estates.
The company plans to reinvest 70% of after-tax profits into the business to support net asset value growth and will distribute the remaining 30% to shareholders, providing a projected dividend yield of 3.5%.
“I am very excited about today’s listing,”, said CEO Stephen Brookes. “It marks the next chapter in our growth path and paves the way for us to accelerate our delivery of around 17,000 homes in the next eight years. In addition, the capital raised through the listing will allow us to acquire and secure land for future development in order to maintain our development pipeline.”
The company plans to develop, retain and manage a rental portfolio of 2,000-3,000 residential units by 2020, generating up to R3bn in revenue.
Balwin is in discussions to acquire a land parcel in Kyalami on which 15,000 sectional-title units could be developed.
Equity analyst Keith McLachlan said Balwin had become an excellent developer that knew its market well.
“Balwin Properties is quite simply the best new listing I have seen in ages. This is a good quality company that has listed at an attractive price,” he said.
“The scale and potential growth at Balwin is really attractive. The Kyalami deal alone would almost double the existing pipeline,” said Mr McLachlan.
Last week, Balwin placed 178,238,798 shares with invited investors at R9.88 per share, being at the upper end of its pricing range.
A total of R1.76bn was raised through the offer.
Mr McLachlan said Balwin was also exposed to the security benefits of sectional title developments. “People buy into a complex because they feel that it is safer than a freehold property, especially in Gauteng.”
Investec Asset Management portfolio manager Peter Clark said Balwin had listed with a good track record, which would attract investors in the future.
“Balwin has a strong track record of execution on its projects, and appears to be well positioned in an attractive segment of the residential market.”