Key message: With Bankenveld adding to the development pipeline,
Calgro has secured many years of steady organic growth.
◼ Calgro released FY25 results. HEPS declined 9% to 171.36c on a 33%
decline in revenue (construction activities were slowed down in 1H as a
conservative measure to reduce construction risk over the election
period). The gross profit margin exceeded in the target range of 20-25%
at 29.4% (up from 27.2% in FY24). Dividends were resumed with a
payment of 8.64c.
◼ Key takeaways from the results: Calgro purposefully slowed down the
development pipeline during FY25 due to the uncertainty over the
election period and Calgro not wanting to have completed properties
that could attract land invasions. This did impact the results in FY25 but
FY26 should revert back to normal levels.
◼ Calgro does do bulk sales, and this has been a feature since 2010. This
is defined as more that 1 unit to a client – many small landlords buy up
to 19 units to develop a rental base (over 19 units triggers a change in
tax treatment). Government also commissions bulk purchases for
various beneficiaries. Bulk sales are not sold at discounted prices.
◼ Banks appetite to fund customers is returning with interest rates
declining and rental rates increasing. Market demand remains strong
with customer confidence improving.
◼ The Bankenveld property provides exciting long-term growth with 20 000
opportunities – this extends Calgro’s available opportunities to a total of
over 36 000 and provides over 15 years of development potential. Land
ownership (R100m cost) has now been transferred. Calgro’s 60%
portion of the initial R250m development cost is approx. R153m. This
would be required in FY26/27 and can be funded internally. First sales
are expected in FY27.
◼ The Memorial Parks grew the gross profit margin to 50.1% (from 42.4%)
with increased sales volumes and lay-by terms coming to an end (lay-by
revenue is only booked at end of term). Market demand remains high.
R95.5m of cash was generated which now covers group costs as
planned. In future Memorial Parks could be able to cover group finance
costs as well.
◼ We adjust our Target Price for Calgro to R8.60 (from R10.20) as general
economic pressure on consumers has remained high, placing Calgro on
a forward 4.0 times PE multiple. Calgro is trading at a significant
discount to realisable NAV.