Not all small caps are hidden gems. Some might deliver explosive upside. But others? They’re ticking time bombs – weighed down by weak balance sheets, shrinking demand, or fading business models.
In a low-growth, high-risk environment like SA, knowing which small caps to avoid is just as valuable as spotting the winners – especially when liquidity dries up and promised turnarounds never materialise.
Here’s one JSE-listed small cap you might want to think twice about before buying.
A REIT running on empty?
Accelerate (JSE: AFP) is a Real Estate Investment Trust (REIT) that invests and subsequently rents spaces in various property sectors – with a core focus on retail.
Accelerate listed back in December 2013 with 51 properties – at a price of 488c and a market capitalisation of around R3.1 billion.
Fourways Mall is the company’s flagship asset consisting of roughly 50% of its portfolio.
The Fund owns several properties including Cedar Square, The Buzz, Waterford, BMW Fourways and the Leaping Frog Centre.
Post-listing, Accelerate grew rapidly, investing locally and offshore in Central and Eastern Europe. While the expansion helped the property fund grow its portfolio (and net asset value by 142%) over the next five years or so, it also more than doubled debt.
Then came a double whammy of problems…
Firstly, the pandemic hammered retail REITs and Accelerate was no exception.
• Rent relief to tenants reduced cash flows
• Collections dropped and vacancy increased
• Property values fell, triggering fair value losses and impacting net asset value
This led to significant losses and dividend suspensions.
The Fourways Mall disaster…
Secondly, Accelerate’s flagship asset – Fourways Mall – underwent a major redevelopment to become one of the largest malls in South Africa.
But it faced delays and was significantly over budget – placing even more pressure on the fund’s balance sheet. Even worse, the “new and improved” Fourways struggled with high vacancies, deteriorating rental income growth and competition with the likes of Mall of Africa.
At the same time, Accelerate’s office and industrial properties experienced weak leasing demand and underperformance. While certain properties were illiquid or difficult to dispose of, impacting the company’s capital recycle program.
By 2024, Accelerate embarked on a significant restructuring, which included fresh leadership, asset disposals and a R300 million rights issue to reduce debt.
To improve Fourways Mall’s situation, Accelerate appointed Flanagan & Gerard and the Moolman Group to manage the mall. They have also committed R400 million for upgrades.
And while there’s been slight improvement in renewals, losses are getting worse, and its share price is in the doldrums.
The latest numbers? Brutal!
In a recent trading update for the year ended 31 March 2025, Accelerate’s losses will increase to between R70.6 million and R72 million – a whopping 651% and 666% higher when compared to its 2024 loss of R9.4 million.
In addition, the company isn’t paying a dividend due to cash flow issues.
It’s no wonder why Accelerate share price trades at 45cps – +90% lower than its listing price.
And despite the company’s share trading at an 83% discount to its NAV per share right, Accelerate looks like the ultimate value trap.
Simply put – while management’s done well to significantly reduce debt, it’s still nearly 4x higher (R3.7 billion) than the company’s market cap of R940 million.
Furthermore, the completion of restructuring is only expected to conclude by late March 2026.
That means no dividend until restructuring is complete.
Not all cheap small caps are deals. Some are warnings and Accelerate looks like one of them.
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