Key message: The Bankenveld project secures a long-term pipeline with a strategic focus to reduce the number of projects under development.
- Calgro released FY26 results. HEPS declined 8% to 156.76c on a 3% increase in revenue. The gross profit margin declined to 27.2% (from 29.4%) – still above the target range of 20-25%. The margin reduction was mainly due to accelerated sales from non-core projects. A dividend of 8.64c was declared.
- Key takeaways from the results: Calgro continues to develop at a measured sustainable rate, backed by investment in previous years in bulk and link infrastructure in legacy developments. This does reduce development risk as in most of its projects Calgro just has to provide internal infrastructure and build the top structures – the growth therefore depends on market demand and not waiting for municipal approvals or bulk infrastructure. While debt levels have increased in line with the increased development spend at Bankenveld, debt levels remain comfortable for what is a capital-intensive business model with non-core sales earmarked for debt reduction.
- With the Bankenveld development due to start construction of top structures in approx. 12 months’ time, Calgro is entering into a new phase of development. The project portfolio will shed non-core holdings (anything outside of Gauteng or W Cape) and trade out of most of the legacy developments in the next five years. New developments will be sought adjacent to existing developments to benefit from existing bilk and link infrastructure.
- The Bankenveld property provides exciting long-term growth with 20 000 opportunities and provides over 15 years of development potential. Calgro’s 60% portion of the initial R250m development cost is approx. R158m. This would be required in FY26/27 and can be funded internally. First sales are expected in FY27.
- Memorial Parks continue to perform well, with the GP margin expanding to 55% (from 51%). Revenue increased by 25% with the successful launch of the Rustenburg park. The layby offering continues to be well received and the strategic objective to cover Group overheads remains on track.
- Calgro remains well positioned in the property market with attractive locations and a well-developed pipeline. We increase our Target Price for Calgro to R9.50 (from R9.00) placing Calgro on a forward 5.4 times PE multiple. Calgro is trading at a significant discount to realisable NAV.