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Standard Bank Group
Balwin Properties 02 June 2025

Lower interest rates driving growth

#themes: Improving macros, improving property demand

FY25A results: Following a tough 1H25A, Balwin delivered better-than-expected results for FY25, driven by a higher-than-expected number of apartment sales in 2H25. FDHEPS of 44.5c declined by 7.1% yoy. This was ahead of our forecast of 41.2c but very much in-line after adjusting for the sale of property concluded in 2H25A. As expected, no dividend was declared. Revenue of R2.2bn declined by 5.7% yoy and surpassed our forecast of R2.11bn. Annuity-type revenue (excluding land sales) increased by 33% to R178m and now represents 8% (5.7%) of total revenue. Apartment sales declined by 7.6% yoy to 1,749, reflecting a 1H/2H split of 640/1,109 units. We had forecast flat apartment sales growth in 2H25A but the 5% growth (1,058 apartments) reported reflects the benefits of lower interest rates and an improvement in consumer confidence. Sales were concentrated in Gauteng (49% of total) followed by the Western Cape (46%) and KZN (5%). The company’s loan-to-value ratio declined marginally to 40.4%. In line with the solid improvement in apartment sales achieved in 2H25A, there was a notable 54% increase in pre-sold apartments at FY25A year-end to 814 compared to 529 pre-sold apartments in FY24A.

Reaction: Balwin’s development pipeline of build-for-sale apartments is currently 35,720 with a development timeline of between 12 and 13 years. In addition, the company is now rolling out a rental portfolio that currently consists of 6,255 apartments that should be developed over the next eight to ten years. We believe that this will create a more defensive asset class and one that will generate important annuity income for the group. 

Catalysts: On the back of lower interest rates, the demand for Balwin’s apartments continues to improve, even after the termination of sales incentives which cost the company R60m in FY25A. We conservatively forecast that apartment sales will reach 3,000 by FY28E but believe this time horizon could be shortened following the recent interest rate cut and the prospect of further cuts on the horizon. Despite market concerns regarding the prospects for the GNU, management reports that apartment sales held up well, suggesting that affordability and interest rates remain the key driver of sales. 

Valuation: A strong recovery in earnings is expected in FY26E as the company benefits from lower and declining interest rates. We forecast FY26E and FY27E dHEPS of 67.3c (+51%) and 94.8c (+41%) respectively, with DPS over the same period of 23.0c and 32.5c respectively. We estimate an FY26E dividend yield of 11%. Based on our conservative earnings forecast, we derive a fair value range for the share of between 255c and 293c (prev 186c and 286c), representing a total return of between 21% and 40%. 

Risks: Macroeconomic challenges regarding interest rates and consumer sentiment, impact of weak unit sales on cash flow generation, delays in obtaining planning and regulatory approvals, reliance on key suppliers and contractors and excessive growth in land bank and number of apartments to be developed. Increased funding costs may also be an issue.


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