In the November 2024 issue of IM, there was a company review of Balwin with the comment that it was a “recovery punt worthy of consideration” at a price then of 225c.
The stock was at 172c in early April, but as IM writes this update after the year-end 2025 results, it has risen by a third, helped by lower interest rates and hopes of further cuts, which have aided sentiment towards the counter.
Balwin draws polarising reactions from investors. Some see its perennial cheapness as a value opportunity, especially with NAV at 910c a share. Others are wary of its historic expansionary bravado, exposed balance sheet and persistent knack for shooting itself in the foot with moves such as rentals and mega-projects, which are off-putting for investors.
But IM is optimistic that Balwin has at last tempered its abundant enthusiasm to be more in tune with South Africa’s economic realities, while repairing the shattered nerves of shareholders who have endured a decade of falling share prices. Could a period of more restrained moves lie ahead for Balwin as it knuckles down, attempting, via actions rather than bluster, to recover poise and earnings profile?
On an earnings multiple of five with an expected recovery in units sold, improving macroeconomic conditions and an uplift in the property market, the forward valuation of Balwin could move to three, enhancing its appeal. Year-end results to February 2025 were a tale of two halves. Interims were awful, as IM reported in the November update, as a slide in units sold to 640 (-23%) hit revenue (-28%) and profit (-57%), with headline earnings down 57% to 16.26c a share.
Recent results were aided by a second-half improvement in units sold alongside the benefit of a property sale. Total apartments sold for the year were 1,749, down 8% from financial 2024. After 640 units sold in the first half, 1,109 were delivered in the second half as the benefit of the 75-point cut in interest rates stimulated the market and consumer confidence.
Gauteng (49%) re-emerged as Balwin’s sales hub, but there was also continued good growth in the Western Cape (46%). A gap in the development pipeline in the Cape led to the percentage dip, with new developments coming online in 2026 aiding growth. KwaZulu-Natal remained lacklustre at 5%, primarily due to localised economic conditions. Group revenue fell 5.7% to R2.22bn, but tight cost control resulted in operating profit rising 4.9% to R347m. About 67% of the profit earned came from the second half, with a 73% rise in revenue and margin improving 2% to 30% as Balwin trimmed costs and curtailed sales incentives amid improving market conditions.
The annuity business, which provides services such as fibre and mortgage origination, reported a 25% rise in revenue to R178m, with net profit up 118% to R43.1m. Balwin has high hopes for this division, targeting a profit of R100m in three years. Headline earnings for the year fell 4% like-for-like to 45.95c a share. No dividend was declared.
Balwin draws polarising reactions from investors. Some see its perennial cheapness as a value opportunity … Others are wary of its historic expansionary bravado
Balwin is growing into its footprint rather than endlessly expanding. It is also judiciously selling parcels of land in its estates to third parties such as hotels, shopping centres, schools and medical centres. In the period, land sales brought in R46m, with a R38m profit contribution. This initiative also serves as a drawcard to estate residents aside from existing amenities such as clubhouses, gyms and parks.
At 234c, potential investors will be seeking guidance for the year ahead. So far, 814 units have already been pre-sold into the financial 2026 period with expectations for the year ahead lifting apartment sales towards 2,200 (up 26%). Two new developments in the Western Cape, De Buurt and Suikerbos in Milnerton, should support buoyant growth in that province. Ongoing cost savings and the growth of annuity will assist margin, with a modest uptick expected, according to comments by management.
Further interest rate cuts should stimulate the market, but the economic environment in South Africa remains subdued and investment in residential property stocks carries a degree of macro risk.
The bottom line is that Balwin could be said to have turned the corner after three years of depressing results. With an improved and optimistic outlook for 2026 and 2027, a recovery in earnings will quickly unwind the earnings multiple down to bargain-basement levels.
IM pencils in 2026 headline earnings of 65c a share (up 41%) and maintains its view of Balwin as a recovery punt.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.