The Balwin Bargain
28 October 2019 By PDSNET
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.