• Mon. Jul 22nd, 2024

ANALYSIS| Exchange Related Gains Drive Mash Holdings to ZWL$1.6bn PAT

ByEconomic Times

Sep 18, 2022

…as Group Targets Portfolio Diversification

By Yona Banda

Financial Performance Highlights

  • Listed property group Mashonaland Holdings earned a Net Profit After Tax of ZWL$1.57 billion in the financial half-year ended 30 June 2022. The performance was supported by a 50% rise in revenues to ZWL$709 million, while net property income (NPI) increased by 41% to ZWL$552 million.
  • The group attributed the topline growth to periodic rental adjustments and improved occupancy which grew to 83% from 79%. The group added that collections were resilient at 97% due to continuous credit control interventions.
  • Operating profits increased by 204% to ZWL$800 million. Without accounting for monetary gains ZWL$503 million, the groups operating profit stood at ZWL$297 million, which was a 14% rise inflation adjusted terms. The ZWL$503 million monetary gain stemmed from foreign currency balances from a deposit paid regarding the disposal of the Charter House building.
  • The groups operations generated a cash flows of ZWL$827 million and a net cash flow of ZWL$157 million.
  • Total capital expenditures during the period stood at ZWL$1.4 billion. The majority of the spending related to the purchase of a 4ha property in the Pomona area. The group intends to develop it into a industrial retail property, with construction expected to commence in October 2022 and an anchor tenant already secured.
  • As the reporting date, the group’s investment property portfolio was valued at ZWL$32.5 billion, up 7% in inflation adjusted terms. Office/Retail and Specialized properties make up the majority of the groups portfolio value. The groups total assets stood at ZW$37.5 billion and total liabilities stood at ZWL$4.5 billion.
  • Updating on its ongoing projects, the group revealed that it expected to complete the Mashview Housing development in the last quarter of 2022. The Van Praagh Day Hospital project commenced construction in the second quarter of 2022, and is targeted for completion by 31 August 2023. The group also revealed that it sold 15 of 24 medium density residential stands from the Windsor Park Ruwa Development. The group expects to use the proceeds to support further development works.
  • Going forward, the group highlighted its strategic focus on portfolio performance optimization, portfolio diversification and operational efficiencies to ensure sustained business growth.
  • The group declared an interim dividend of ZWLc 8.401 per share. 

Commentary and Analysis

Expectedly, the financial results were significantly affected by exchange rate related gains and losses. The groups operating profit looks significantly less impressive when the income unrelated to property operations is accounted for. The declining margins suggest the group’s rental prices are not keeping up with the rising operating costs. It’s an issue that would be expected under the current operating environment, and will remain one foreseeably as currency stability looks set to remain elusive. It’s assumed that a reasonable amount of the groups rentals are in foreign currency, which, combined with the foreign currency balances from the Charter House disposal should provide some margin of safety in a hyperinflation scenario. Looking beyond, with the majority of the group’s rental space concentrated in depressed markets in CBD office/retail and industrial property – it is sensible that portfolio diversification is a key strategic objective. The concern is that scarce resources might end up being allocated towards property classes that are only attractive because of short-term circumstances.

With Dawn Properties and ZPI delisting, Mashonaland Holdings and First Mutual Properties are the remaining listed property concerns. Since the start of 2022, Mash Holdings share has outperformed its remaining peer and the overall market, gaining 70% in nominal terms and losing 70% in US dollar implied terms. The share is currently trading at an estimated price to book ratio of 0.2x – Harare


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