Balwin upbeat as it goes green

CEO Steve Brookes is hoping to attract environmentally minded buyers

SA’s largest sectional title developer, Balwin Properties, aims to be SA’s most environmentally friendly developer, becoming the latest company to express its commitment to sustainable business practices. We are not taking any“prisoners with regard to greening,” said CEO Steve Brookes.

SA’s largest sectional title developer, Balwin Properties, aims to be the country’s most environmentally friendly developer, the latest company to express its commitment to sustainable business practices as pressure mounts for regulators, customers and investors to burnish their green credentials.

“We are not taking any prisoners with regard to greening,” said CEO Steve Brookes.

“We are a leader in green mortgages. Almost every bank is ready to drop their rate by half a percentage point.”

Balwin joins a host of companies that aim to raise their environmental performance, betting on eco-friendly businesses to keep regulators away and attract consumers and investors to their products and services.

Brookes expects its sharper focus on nonpolluting business practices to pay off in terms of attracting environmentally minded buyers and those looking to benefit from cheaper mortgages.

Balwin joined forces with Absa to introduce SA’s first green home loan in 2020, while First National Bank, Nedbank and Standard bank have now introduced similar products.

The group has a development pipeline of 56,313 apartments across 29 developments in target nodes. This represents a development horizon of 15-20 years.

EDGE CERTIFICATION

All Balwin apartments developed in its first half have been registered for the international

Excellence in Design for Greater Efficiency (Edge), a green building certification system for emerging markets. It was developed by the World Bank’s International Finance Corporation, with 471 having received it.

Balwin is targeting Edge advanced certification on all new registrations. That requires apartments to achieve an on-site energy saving of 40% or more, an improvement from the 20% savings required for basic certification.

Brookes was speaking to Business Day shortly after the company issued its half-year results, which painted a rosier picture than before for demand as revenue grew by almost half during the period.

Group revenue rose 41% to R1.3bn to end-August, still down 7% from before Covid-19, but Balwin said its recovery is pleasing. Sustained demand from clients gives it confidence in the resilience of its brand.

EARNINGS ROSE

Balwin specialises in large-scale sectional title estates for SA’s low- to middle-income population, with estates typically consisting of 1,000-2,000 sectional title residential apartments located in the targeted nodes of Johannesburg, Tshwane, the Western Cape and KwaZuluNatal.

Headline earnings rose 44% to R117m to end-August due to an increased number of apartments recognised in revenue, up to 1,261 from 896 in the previous matching period. Headline earnings, a widely used profit measure in SA that excludes certain one-off items, were just more than a third lower in the group’s first half than in the same period in 2019.

Balwin said it presold 2,846 apartments after the end of August, an increase of 347.

The group’s policy is not to recognise revenue until handover or occupation.

Balwin declared a 7.4c per share dividend, a payout of about R35m, but down from 19.6c in the previous matching period. The previous dividend included a deferred dividend for its 2020 year, and excluding this, the group would have paid out about R24m, or 5.2c.

COMMENDABLE RESULTS

The group’s net asset value per share rose 6.7% to R6.92, but with its shares trading at almost a 50% discount.

Small Talk Daily’s Anthony Clark said Balwin’s first-half results are commendable, and the group should show a good second-half as well. He was not surprised that the market took a cautious view towards the property group.

“We are moving into an environment of rising interest rates, alongside low wage inflation, no employment growth and a rising cost of every day living,” said Clark. “The company looks dirt cheap, has a good pipeline of development ahead of it, and clear demand for its product. But we have to temper that with the state of the economy.”

In afternoon trade, Balwin’s share price was up 1.54% at R3.95, having fallen 13.2% so far in 2021, but having risen 7% from the start of 2020.