The last review on property developer Balwin was in June 2025 at 234c, and IM maintained its recommendation of the stock as a recovery punt with a target of 325c.
Balwin hit 324c in early September, then slipped as the counter headed towards its interim results. IM was pleased with the 38% return in three months.
Balwin recently released its half-year results to August. The recovery that IM predicted panned out thanks to improved apartment sales; buyers have been spurred by interest rate cuts.
It recorded sales of 928 units. There was good growth in sales in the Western Cape, which accounted for 52% (486) of all units sold, up from 46% in the previous six months. Gauteng (390 units) and KwaZulu-Natal (52) also recorded sales growth. In recent weeks, Gauteng has had better sales growth than the Western Cape, indicating a recovery in the province.
At the results presentation, CEO Steve Brookes said he expects continuing sales growth in the Western Cape as new land allocations and projects come onstream. However, he cautioned that cooling is inevitable.
Revenue in the period rose 44% to R1.2bn with a 33% increase in profit to R102m. Headline earnings were up 29% to 20.91c a share and NAV rose 8% to 946c a share. The margin at 29% slipped 300 basis points in the six months as the tail end of past discounting worked its way through results, with management confident of margin creep in the second half.
At Balwin’s annuity business, which encompasses the provision of fibre and mortgage and rental services, revenue was up 55% to R101m, an 8.3% contribution to group revenue. Its operating profit contribution was R34m.
The market should also monitor Balwin’s push into rentals via the build-to-rent model
The gung-ho Balwin of the past seems to have mellowed and become more pragmatic, with a greater focus on financial prudence and returns. This will take time to materialise, but the “growth for growth’s sake” philosophy has moderated towards profitability and margin enhancement.
What has become evident over the past 12 months is Balwin’s ability to find new sources of revenue while profiting from its existing footprint. Its vast land bank portfolio, once destined solely for residential development, has now evolved: key parcels are carved out to sell for private schools, shopping locations and leisure facilities. This adds more features for residents and expands Balwin’s income stream.
A further evolution has been the introduction of retirement lifestyle estates — with dedicated security and services tailored towards retirees — at selected Balwin developments. This could be an interesting niche given the growth of managed retirement villages. IM believes that land sales and niche offerings could generate R750m in additional earnings for Balwin in the next few years.
The market should also monitor Balwin’s push into rentals via the build-to-rent model, according to which the company builds units to rent rather than sell. The renters can access the same lifestyle facilities as owners in a Balwin estate, so these units can be marketed differently from traditional rentals. These tenancies are envisioned to provide a more reliable income stream, and there may be an opportunity to parcel them together over the longer term, perhaps into a real estate investment trust, or sell off segments to realise investment returns.
With a planned pipeline of 36,000 units for sale staggered for development over the next decade and plans for a rental portfolio of more than 6,000 units, Balwin has a solid pipeline of 20 active projects, with improving defensive qualities.
It is worth mentioning Balwin’s quarrel with the City of Tshwane over payment of R2.1bn in infrastructure dues. Balwin is engaging with the municipality and authorities; the amount is not a business threat but highlights operational risks for developers in South Africa.
With lower interest rates driving growth and a move towards a more balanced portfolio via annuity and rentals, all Balwin really needs is better economic growth to bolster the aspirational but constrained consumer who has the desire to become a homeowner.
IM estimates Balwin could attain sales of 2,200 units — a 25% uplift on the 1,749 reported in 2025 — and maintain the headline earnings forecast of 65c a share (up 36%). This places the stock on a forward p:e of about four.
With lower levels of discounting and sale terminations alongside the feel-good factor of lower interest rates, IM retains its recovery punt recommendation — and would raise this to a buy if GDP growth improved.
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