Balwin Properties races ahead in market debut

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Stephen Brookes, CEO of Balwin Properties Limited sounding the kudu horn at the JSE listing event. Stephen Brookes, CEO of Balwin Properties Limited sounding the kudu horn at the JSE listing event.

SA’s largest homebuilder, Balwin Properties enjoyed a sparkling debut on the JSE, with shares opening at R11 giving the company a market capitalization of R5.2 billion.

The more than R500 billion real estate sector has seen 32 listings that have come into fruition since 2013. But it seems that the next wave of property counters to debut will boast a different offering.

The listing of the first pure residential fund, Indluplace Properties in June, which manages 3 600 housing units valued at R1.6 billion, was tipped to usher in an era of specialist listings.

In that vein, South Africa’s largest self-storage property fund, Stor-Age Property REIT Limited (Stor-Age), is set to list on the JSE in November as the first REIT of its kind on the exchange.

Residential developer Balwin Properties is the latest counter which listed on 15th of October, with its first trade at R11 giving the company a market capitalisation of R5.2 billion.

The company was anticipating having a market capitalisation on listing of between R4.2bn and R4.7bn.

Prior to listing, Balwin Properties raised a total of R1.76bn through a significantly oversubscribed offer and placement of about 178.2 million shares with invited investors at R9.88 a share, which was at the upper end of the pricing range. The offer represents 32.85 percent of Balwin’s issued share capital.

A big chunk of the money will be used to fund the group's organic growth plans and facilitate potential acquisitions opportunities.

Analysts say Balwin offers tremendous upside over the next few years given its impressive development pipeline.

The Fund 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 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.


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