Balwin: decent growth and a better balance sheet
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Residential property developer Balwin has issued a business update for the year ended February 2022.
Balwin sold 2,960 apartments in the 2022 financial year, up from 2,546 in the comparable year. New developments in Gauteng, KZN and the Western Cape contributed to sales this year. The 16% increase in volumes was achieved at a similar average selling price to the prior period.
The Green Collection developments offer a lower price point and have proven to be popular in this environment, now contributing 31% of volume and 19% of revenue. The Classic Collection is still the most important contributor, with 60% of volumes and 65% of revenue. The fanciest developments (the Signature Collection) contributed 9% of volumes and 16% of revenue.
Around 1,900 apartments have been pre-sold and not recorded in revenue in this financial year.
The successful implementation of the B-BBEE ownership transaction has taken Balwin to a Level 4 B-BBEE rating from Level 5.
Group HEPS is only expected to increase by between 2% and 7% for this financial year as the B-BBEE transaction carried a significant accounting cost under IFRS 2 accounting rules. To adjust for this, Balwin also discloses “core HEPS” which is expected to be 12% to 17% higher.
The cash position at the end of February of R659 million is an increase of R328 million year-on-year. The balance sheet has been further supported by R560 million in term loans from Stanlib and Sanlam during the year, so Balwin has broadened its funding base.
As we enter a rising interest rate cycle, Balwin will need a keep a close eye on the financial health of consumers. The flexibility in the business model of different price points (the various “collections”) is useful going forward.
The share price has fallen nearly 30% in the past year. Balwin sells many apartments but struggles to generate the same love from the market.
