Private investors are always looking for a “sure thing”. This is an investment where there is plenty of upside potential, but limited downside – and they want that at a very good price. Balwin properties comes very close to that ideal. It is a small property developer that focuses on developing, either for sale or for rent, secure properties mainly in the major centres.
The three years that it has been listed have been among the worst ever recorded for property shares in South Africa – especially 2018 when the JSE property index (JSE-SAPY) fell a whopping 25%. This was mainly the fault of the Resilient Group of companies which were the subject of several negative reports which suggested that they were involved in share manipulation arising from their cross-shareholdings and directorships. Most of those allegations have now been shown to be untrue, but the rumours and negativity associated with them have combined with a very difficult property market to cause property shares to be severely re-rated downwards.
And this situation has now created an opportunity for private investors, because some property shares are now trading at ridiculously low levels – well below the value of the properties which they own. Balwin is now trading for 322c per share and has a recently updated net asset value (NAV) of 567c – which means that it is trading at a 43% discount. Among other things, this makes it a potential take-over target. And what is nice about property shares is that the NAV represents tangible properties which have been independently valued. Read More