ARTICLES

The Balwin Bargain

28 October 2019 By PDSNET

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. On 5th December 2018, the company announced a "Strategic Rental Model Initiative" in terms of which it plans to rent out properties for between R4500 and R8500 a month. 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. It gives the share that much-sought-after “annuity income" which adds stability to the investment. Balwin owns 25% of Balwin Rental which has the right to buy as many as 4544 of the units developed by Balwin. This should help to stabilise the company's income. Eventually, it is expected that Balwin Rentals will be listed. Extraordinarily, the share, at 322c, is trading on a P:E ratio of just 3,29 – well below the P:E of the property index (JSE-Sapy) which is trading on an average P:E of 15,48. Consider the chart:

Balwin Properties (BWN) February 2017 to October 2019 - Chart by ShareFriend Pro

Here you can see that the share has been falling for the past two years – but this year it formed an “island” and has now broken up out of that formation – indicating a probable new upward trend. We see this share as “ticking the boxes” for private investors:

• It has sufficient volume traded to make it practical to buy and sell,
• It is trading well below its NAV,
• Its NAV is based on strong assets,
• It has excellent management,
• It is developing a solid annuity income,
• It has minimal working capital,
• It is not over-geared.

   

DISCLAIMER

All information and data contained within the PDSnet Articles is for informational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet Articles are based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any comment or opinion for any reason.

Share this article:

PDSNET ARTICLES

Bubble

Last Friday the S&P500 reached another new all-time record high, closing at 6791 and reaching a new intra-day record high of 6807. This is obviously an exciting time for private investors, but with each new record high the systematic risk of a bear trend or crash increases. Consider the chart:

The PEG Ratio

Since the government of national unity (GNU) came into power in June 2024, there has been a definite improvement in the South African economy. Perhaps the improvement is not as dramatic as some people were expecting, but the progress cannot be denied.

Possibly the best indicator of that is the 28% rise in the JSE Banking index which, before the GNU had

Rare Earth Elements

Investors worldwide had been of the opinion that Trump’s ability to impact markets was on the decline. His erratic, on-again, off again tariff policies had either disappeared or had been mostly discounted into share prices. His attack on the second largest economy in the world, China, seemed to have been largely resolved, and a meeting with

US Shutdown

There has been much in the media recently about the US government shutdown and the fear among investors that it might begin to affect the stock market, depending on how long it lasts.

A shutdown occurs when the US government reaches its budget limit and requires a bill to be passed through both Houses to extend the government’s spending limits.

New Listings

Two new companies, ASP Isotopes and Greencoat Renewables, have recently come to the JSE. Both are developing companies that have recently made losses and have been funding those losses by raising capital and selling assets. They both have substantial “blue sky” potential but also carry substantial investment risk. This is probably truer of ASP

Exponential Growth

The  S&P 500 index is important because all the stock markets around the world tend to follow it. If the S&P is in a bull trend then London, Tokyo and the JSE will also be in a bull trend – and vice versa.

The S&P500 index began 68 years ago on 4 th March 1957 with an initial value of 43,73. It took nearly

The US Jobs Market

International investors who trade on Wall Street are generally negative about any good news from the economy because it tends to make the monetary policy committee (MPC) more hawkish and less likely to reduce interest rates. The opposite is also true. But there comes a point where bad news is so bad that investors begin to fear that the US economy is heading

Jackson Hole

Once a year in late August central bankers and academics congregate in Jackson Hole to discuss the state of the economy and consider the way forward. Traditionally, the Chair of the Federal Reserve Bank (“the Fed”) addresses the meeting and gives direction to its thinking on monetary policy in the US. This year, the comments of Jerome Powell resulted in the

Choppies

Choppies is a supermarket chain which operates in Botswana, Namibia and Zambia. It is listed both on the Johannesburg Stock Exchange (JSE) and on the Botswana Stock Exchange (BSE). Notably, the company has resisted the temptation to re-enter the highly competitive and cut-throat retail market in South Africa, having exited that market in 2020 due to sustained losses. Despite

Gold Resistance

All investments throughout the world can be ranked on a scale from high risk to low risk. As a general rule, in the world of investment, risk and return rise together. In other words, as the risks in an investment increase, so does the return necessary to attract investors.

At the one end of the scale there are very low risk investments